Construction Industry: Review of 2017 and looking ahead in 2018
2017 was a rollercoaster year for the construction industry and its workers, according to Steve Mansour, CEO of construction insurance specialist, CRL. From Brexit, zero growth predictions and reports suggesting that the sector is struggling, to seemingly climbing out of a recession thanks to a surge in housebuilding, it’s fair to say we’ve had quite a year, he says.
It’s no surprise that Brexit had the biggest impact on the industry, with ‘uncertainty’ becoming the word of the year. Uncertainty over the outcome of Brexit negotiations and the survival of the current administration have disrupted both commercial and industrial investment. If we pair this with the stamp duty increase on properties over £1M, it is possible you will find the catalyst to the current housing crunch.
Such factors also started the ball rolling for the shift in investment from London to the north, with developers requiring cheaper land. This shift was emphasised last year by the benefits of buying outside the capital. Eight or ten homes in the northern regions could cost a similar amount to just one home in London, and yet investors get capital growth and more homes in their portfolio to rent. For a long time, the feeling has been that London is the place to buy as that’s where the most money has been made. However in 2017, this myth was dispelled.
We also saw buyers invest in areas of regeneration with improved transport infrastructure planned, and this was compounded by Philip Hammond’s announcement in the Autumn Budget for a £7Bn expressway scheme for the Oxford-Cambridge corridor. The plan is for five new garden towns as well as new road and rail infrastructure. Whilst these sorts of mass developments are likely to attract investors, spending large amounts of government money on such projects could be seen as a waste, with many other regions in desperate need of further investment.
Government figures show that in England over 200,000 homes have been sitting empty for at least six months. This is likely due to buyers using these properties as investments for future growth, which unfortunately intensifies the housing problem. This problem only increases as more buyers wait to see whether transport links will be developed in the area. If such a project goes ahead, investors look to double or triple property value, simply because it improves commuting options.
Whilst the Government’s plan to tackle the housing crisis by increasing council tax on these empty homes looks positive on paper, there is not really enough of a disincentive for wealthy buyers. It might be more lucrative to simply pay the extra tax and leave them empty, rather than declare which properties they own.
Another big shift we saw last year relates to innovation, with the northern regions leading the way by building with a lifestyle purchaser in mind, emphasising how trends and purchaser requirements are changing. Structurally, it’s all about convenience and modernism; with fast-paced, on-the-go lifestyles, homes have to be fit for purpose. A recent CRL project saw the installation of a cold storage room, in a very similar style to trends seen in the capital or America, and we expect this to increase moving forward.
Looking at the year ahead
Currently, we are seeing developers build multitudes of three-bed family homes, in a bid to solve the ever-evolving housing shortage. There has to be a shift this year to fit with demand, which will create more choice in the market, and respond to consumer need. Developers must start recognising this if they are to stay ahead of the game. This shouldn’t mean increased property prices, it should mean a welcome change, one of bespoke or enhanced product offerings for consumers.
There isn’t any doubt that technological advancements have already improved construction and we expect this to expand this year, through processes such as modular building and 3D printing. Expect more virtual reality and augmented reality use, with potential buyers visiting the shell of a virtual house, allowing them to design and configure a truly unique home. This will mean a fit for purpose property, which will hopefully result in purchasers staying in their homes for longer.
2018 must be the year we encourage entrepreneurialism and further innovation in the construction industry and because of this, we expect it to be the year of the SME builder. Not only will they continue to be the backbone of the industry, but we will see their agility and creativity come to the forefront.
It seems that Brexit will continue to be a real issue as the year progresses, particularly in terms of recruitment and careers. The UK’s departure from the EU has thrown the issue into sharper focus given the industry’s reliance on overseas labour, meaning the drive to attract and retain talent has never been so vital.
To solve this problem, it is imperative we showcase the true earning potential, creative roles and development paths on offer. As the use of technology becomes widespread in the sector, construction firms should find it easier to attract millennials who thrive on using the latest technology. Whilst it is great to see the industry investing heavily in recruitment and training of young people, these initiatives are ones that must continue to receive attention, if we are to combat the current labour shortage.
Overall, the outlook for the industry is bright, but it will have its challenges. The best thing we can do is stay knowledgeable and open to new ideas and ways of working. At CRL, we aim to stay abreast of changes for two reasons: to use them ourselves and to support our customer. If we try and stay innovative ourselves, we can make sure we have a working knowledge so we can continue to support our customers when they say, “we want to be venturous with our build”. This is something all firms must do this year to support growth.
The construction industry will continue to evolve throughout 2018, and it’s up to construction firms on whether or not they want to grow with it.
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