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Recent jump in the number of construction workers suggests the sector is finally turning a corner

Date: 9th October 2013

 

New housing projects providing a crucial boost to the sector


A jump in the number of contractors being hired by the construction sector shows that renewed optimism in the sector is finally feeding through to new jobs in the sector, says NoPalaver Group, a leading provider of accounting services to contractors.

NoPalaver says that the number of individual contractors employed in the construction industry has jumped by 6,000 in the last three months alone, up from 269,000 to 275,000 (June 30 2013).

NoPalaver explains that an increase in the number of contractors is a good early indicator of a revival in the sector as professional-level contractors often play an important part in the early stages of a construction project.

Number of individual contractors within the construction sector*

Graph

Graham Jenner, Director at NoPalaver, says: "The increase in the number of contractors in the most recent quarter is a sign of that workloads are picking up significantly. However, low levels of bank lending to the sector means there is still a long way to go before the sector is firing on all cylinders."

"While recent growth within the sector is great news, it is important to note that this was preceded by a deep decline the quarter before. The construction industry is clearly still very volatile, and the Government needs to make sure it is doing what it can in order to ensure that recovery in this sector is not restricted to residential property construction."

"The number of individual contractors surged in London in 2011-12, as a large workforce was required to complete Olympic construction projects. Since then, we have seen a fall in big commercial projects, with major London projects like the Pinnacle put on ice and HS2."

Graham Jenner adds: "Outside of London we haven't seen much large-scale commercial property construction activity being carried out at all, as there simply isn't the demand."

ONS figures show that an increase in construction sector output outpaced GDP growth in the most recent quarter**, however, the construction sector was rebounding from the start of the year when output was at its lowest level since 1998. GDP increased by 0.6% in Q2 2013, while output in the construction sector increased by 0.9%, following a 5% shrink in Q1 2013.

Housing sector projects driving demand

While output in the construction sector continues to fluctuate, one field which may provide hope for contractors is house building projects.

A recent ONS survey*** found that the 2.2% increase in monthly construction output in July 2013 was predominantly down to new building work for private housing, which showed increases of 3.2%.

NoPalaver adds that the increase in house-building projects is likely to continue, as the recent 2013 Spending Review announced a 3bn capital investment for affordable housing.

Graham Jenner says: "The construction sector is being given a much needed shot in the arm by the huge demand for new build homes under the New Buy and Help to Buy schemes. While commercial and civil projects may not be providing as much work for contractors, house-building is likely to compensate to some extent."

* ONS classification "Construction of Buildings" to March 2013 (latest figures available)
**ONS Gross Domestic Product Preliminary Estimate, Q2 2013
*** Output in the Construction Industry, July 2013

 

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