Economy: Recruitment market by sector: Construction

The building and construction industry continues to surge ahead, boosted by
higher government spending, particularly on infrastructure, school buildings
and hospitals. Last year, total construction output rose by 3.5%, more than
double the growth prevailing in 1999 and 2000. The industry is on course to
maintain these high levels of growth over the next two to three years.

In 2001, much of the growth came from increased spending on repairs and
maintenance and improvement, rather than new-build. Overall, repairs and
maintenance and improvement rose by 4.5%, whereas new-build increased by only
2.8%. Indeed, there were some big falls in some areas of new-build including
private housing (-4.6%), and industrial (-2.3%).

This year and over the following couple of years, growth is expected to be
much more balanced. The only sector not expected to grow this year is
industrial, which is still suffering from the recession in the manufacturing
industry, which has hit business investment and the willingness to invest in
property very hard indeed.

Infrastructure spending is being boosted by work on major projects such as
the Cross Channel Rail Link, West Coast Mainline, the Birmingham Northern
Relief Road and Terminal 5 at Heathrow. This trend has been somewhat offset by
a cutback in capital spending by the water authorities.

The number of houses completed last year by private housebuilders was the
lowest for 20 years. The lack of new-build was not for lack of demand, as the
sharp rise in new house prices testifies. It is rather the lack of supply
caused by planning restrictions which are severely limiting the increase in the
housing stock, especially in London and the South East.

Similarly, new social housing starts in 2001 were at their lowest for more
than 50 years. The Government is beginning to address the shortage of social
housing and has pledged a substantial increase in funding for housing
associations over the next few years, so the sector should begin to grow again.

The commercial sector has grown strongly over the past three years, and this
rate of growth is expected to continue in 2002. However, new orders for the
commercial sector have fallen off recently and this sector is predicted to cool
off in the coming years.

Housebuilders have been posting positive figures, as low interest rates,
inflation and unemployment have buoyed demand for new homes. Westbury declared
a 14% rise in annual profits and predicted further growth, while Bovis Homes
Group said sales and prices have continued to improve since its reported 19%
jump in 2001 profits in March.

McCarthy & Stone, the retirement homebuilder, posted a 19% rise in
half-year profits.

Hanson, the building materials supplier has reported that it expects
earnings in the first half of the year to be up on last years performance.
Lafarge, the world’s biggest building materials maker, reported a 38.6% rise in
first quarter sales, rising to £1.95 billion, while Travis Perkins saw a rise
in like-for-like sales of 6% in the first 4 months of 2002.

The buoyancy of the construction industry is reflected in the strong growth
in earnings which are running at about 6% per annum at present and the growth
in employment which averages around 50,000 in 2002.

This article first appeared in Recruitment Trends & Forecasts.
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