The latest construction output figures have left Michael Conroy Harris, construction expert at law firm Eversheds, thinking that perhaps what we are seeing is the UK market stabilising at its real size. And that, he says, may be no bad thing
We all have a fascination with reviewing the latest construction output figures on a month by month basis, trying to fathom what they mean in terms of the overall health of the construction industry. There was plenty of evidence of this happening last week, when the ONS figures for May revealed flat growth compared with April.
Usually, we look back and compare to the highs of the industry before the credit crunch. But that runs the risk of forever looking at a fixed point that was quite exceptional, leaving us with a distorted view of where we are and, more importantly, where we are headed as an industry.
Bill Gates summed it up well when he said that “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”. How true is that for us?
If we look back to 2003, the GVA of the construction sector was £88bn, or 7.2% of the total economy. By 2011 it was £89.5bn, or 6.7% of the total economy, based on government data published in the House of Commons Library. It would be wrong to say that the data suggests there has been little change in the industry in the overall period because, in that time, it has both grown by over 20%, and then shrunk again.
So what might the GVA of the construction sector be in 2023? Who knows? It might still be about £88bn.
My own view is that the industry at its high point (measured in terms of output) was not a sustainable unit, and that since that time it has been adjusting to a size that is sustainable. The capacity of the industry has reduced due to obvious factors including business failures and businesses restructuring and the sometimes less obvious factors: we can get more for less by improved efficiencies and, in truth, we need less anyway due to different ways of working and living.
Success stories in the industry will doubtless be those businesses who pioneer innovation, and there is little doubt that more of the industry will operate on the wider global stage. Production methods will lead to more units being produced off-site and less labour on site. End users will expect streamlined procurement processes and cutting edge approaches to things such as BIM.
And what, for that matter, will they want from their construction lawyers like me? I expect it will be clear, concise contracts and pragmatic approaches to disputes to be settled through swift and cost-effective means – for while I expect the industry to be unrecognisable in a further 10 years, I still think there may be some disputes.