After the drop in share price data for developers, housebuilders and property contractors, you’d be forgiven for thinking that the forecast is pretty bleak for the construction sector. Such is the ‘doom and gloom’ that is flying around the industry at present that project start dates are set to fall by 2% in 2016 – down from the original forecast of a 6% increase in 2015.
In spite of all this, recent discussions between Glenigan, DeHavilland and a variety of other leading economic organisations revealed a number of potential positives for the industry. First of all, there are a number of areas within construction where demand is still extremely high. The Education and Health Care sectors in particular are still forecasted to grow in-line with the pre-brexit forecast as the demand for secondary schools and hospitals continues to grow.
In addition to this, the hotel and leisure sectors could see considerable investment over the next few months as the weakening of the pound encourages both domestic and international tourism to go up, increasing the demand for more space in the sector.
This has all been backed up by Allan Wilén, Glenigan’s economics director, who said that forecasts for government spending were “virtually unchanged” as a result of the Leave vote.
There is also the issue that if the economy struggles further there will be the need for the government to introduce significant funds to boost growth. Whilst these may come in the form of infrastructure investments into alternative construction areas such as the Roads and Highways industry, it will give a helping hand to construction companies across the country.
The final area that is sure to have a large bearing on how the construction industry will perform over the coming year is the future of George Osborn. Whilst his role in a potential cabinet re-shuffle is completely unknown, if rumours are correct and he does take up the foreign office brief then this could provide further aid to the sector.
Having already formed extremely strong relationships with foreign investors (especially the Chinese) and with money needed to plug the gaps in construction funding, a move to the foreign office for Mr Osborne may be a good thing.
Whilst such an economic forecast would be extremely positive for the construction sector in the wake of an EU exit, we’ll have to wait for a new Prime Minister to be instated before we can see for certain what the future holds.