BMI View : G rowth in the UK construction sector slow significantly in 2017 on the back of delayed investment decisions and a slowing of the wider economy following the vote to leave the EU. Our longer-term outlook remains intact, given that the UK ' s significant infrastructure project pipeline is benefitting from long-delayed decisions being made on mega - projects.
Latest Updates And Structural Trends
Following the Brexit vote, we see growth in the construction sector slowing dramatically in 2017 to 0.5% y-o-y. In line with our post-Brexit upside risk scenario for the UK infrastructure sector, we have increased average annual construction industry real growth forecast for 2018-2025 to 2.8%.
Our revised forecasts show robust growth for the UK's airport infrastructure sector throughout our 10 year period. Upgrades and refurbishments underpin annual average growth of 8% up to 2019, when we expect construction on an expanded Heathrow to begin providing a significant boost to growth to the end of our forecast period in 2025.
We have upgraded our forecasts for the power plant and transmission grids infrastructure sector to include the Hinkley Point C project, which now sees the sector accelerating beyond 2020 rather than slowing. Outside of nuclear power, the biggest impact of the Brexit vote will be by reaffirming investors' decision to stand on the sidelines while traditional power plants are unattractive or unprofitable to invest in.
|e/f = BMI estimate/forecast. Source: ONS, BMI|
|Construction industry value, GBPbn||104.34||105.91||109.08||114.26||120.32||126.34||132.72||139.53||146.64||153.39||160.60|
|Construction Industry Value, Real Growth, % y-o-y||3.45||1.00||0.50||2.10||2.80||2.75||3.05||3.13||3.10||2.60||2.70|
|Construction Industry Value, % of GDP||5.6||5.6||5.6||5.6||5.6||5.7||5.8||5.8||5.9||5.9||6.0|
The UK has fallen significantly down the rankings in our Infrastructure RRI for Western Europe and North America since the EU referendum result, with an overall score of 70.4.
This is a result of a reduction of rewards on offer in the market over the short term, following the Brexit vote. The large size of the UK's construction sector is not enough to maintain its high score following our downward revisions to the market's growth outlook. The country achieves an Industry Rewards score of 55.
The UK still scores well in global terms in the Country Rewards Index, with a score of 88.9. The UK has a long-established and strong financial market, which is ideal for the infrastructure industry's need for long-term capital. However, Country Risk scores have taken a hit from a weaker economic growth outlook and uncertain trading relationship with the EU, as well as policy continuity concerns.
|Geography||Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
|Note: Scores out of 100. Source: BMI|
The United Kingdom Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's United Kingdom Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the British infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for United Kingdom to test other views - a key input for successful budgetary and planning in the British infrastructure market.
- Target business opportunities and risks in the British infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in United Kingdom.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.