UK market intelligence: value and virtue – building back greener
Our UK market intelligence for spring 2021 examines the outlook for the industry, with a focus on how sustainable construction has become central to the UK’s post-Brexit, post-COVID future.
When the Prime Minister announced £5bn of capital investment projects last summer, he likened it to America’s Depression-era New Deal stating that the Government would “build back better, build back greener, build back faster”.
The shift to recovery comes in a year when the UK is hosting the 26th UN Climate Change Conference. This means the country’s commitment to reduce its net carbon emissions to zero and deliver a green recovery will come under the global spotlight, but it also provides an opportunity to set the agenda and lead by example.
The UK Government is pushing for construction to live up to its potential both as a force for environmental good and as an engine of the post-COVID recovery. However, with the sector’s emissions hitting a record high in 2019, the industry faces a significant challenge to become more sustainable.
The construction industry contracted by 12.5 percent during 2020, the sharpest drop in output seen since the record fall recorded in 2009, caused by the Global Financial Crisis. This was markedly worse than the -9.9 percent retrenchment seen across the UK economy as a whole, and the sharpest decline of all the key industrial sectors.
However, these annualised figures mask the sharpness of the industry’s decline and the speed of its subsequent recovery. By any measure, 2020 was a torrid, rollercoaster year for UK construction – but it ended on a comparatively high note.
UK GDP grew by 1.0 percent in Q4 2020, successfully scotching talk of a ‘double dip’ recession. The construction industry contributed well to that growth, increasing output by 4.6 percent across the final three months of 2020.
The case for building green
As the economy unlocks and the Government’s generous support package for struggling firms is withdrawn, insolvency risks will emerge. Coupled with historic capacity constraints and skills shortages, inflation is likely to increase steadily across our forecast horizon.
One key driver influencing future pricing will be the increased demand and supply capacity for sustainable products as part of the UK government’s green recovery and acceleration to net zero.
Although large scale options for cost neutral net zero retrofit schemes can be expected by the end of 2023, the dynamics of new build properties bring a different set of challenges.
If a crucial tipping point on cost can be reached by the residential sector by this date, it could pave the way for the wider real estate industry to follow. But to achieve this, industry must act now to uphold its part of the bargain and break its low margin, low investment cycle and change how it builds capability.
Download the report to see more economic data and insight, and to read about tender conditions in the UK.
Please visit our COVID-19 response page for all of our resources relating to the impact of COVID-19 on the construction sector.