March 2014 – Steel sector ready for recovery
By the time you read this the Chancellor will have finished his Budget speech, the small print will have been examined and the corporate world will have delivered its verdict on whether it was good for business.
Many businesses will have been waiting to hear the Chancellor’s Budget speech before finalising their investment plans. Unlike a year ago however, when the Chancellor predicted a sluggish 0.6% growth in GNP for the year, there seems to be more than a fair wind behind the current economic recovery.
Growth over the year turned out to be almost three times the Chancellor’s prediction, at almost 2%, and the Bank of England is now talking about 3% growth for this year – with many economists saying that this is still too pessimistic. BCSA President Ivor Roberts told the National Dinner that the light at the end of the tunnel was encouragingly bright, though he tempered that with warnings that margins remain tight and payment practices still need to be reformed.
The evidence mounts though that a broad based, increasingly strong economic recovery is under way. Recent evidence from Glenigans for example pointed to a 54% rise in starts on-site for office developments compared to a year ago, and a 16% growth in industrial projects. The hotel and leisure sector, another key market for steel construction, grew 21% although there was no sign of much improvement in retail – recent contracts awarded for some major retail led developments in the past month might change that picture soon.
Health projects were down over 40% as hospital building was cut back, but education spending on construction projects rose by 17%. Overall there was a 10% rise in project starts, led by the private sector. We are starting from a low base, but the direction of change is clearly positive.
Even more recently, there have been reports of a huge amount of international institutional investment funds looking for a home in infrastructure, with the UK a favoured destination. The pre financial crisis output peak for the economy overall is in sight; but despite all the good news it will probably be some time before the output of the construction industry catches up on that.
Already though we are hearing about shortages of some construction materials and of people with the skills to work with some of them. As Ivor Roberts said at the National Dinner, whatever pick up there is in the pace of demand the steel construction sector remains robust and ready to respond.
Some capacity has been trimmed during the recession, as would be expected, but the steel construction sector has continued to invest in skills and more efficient processes. It remains the world leader in providing cost-effective quality; and you can base your construction budget on that.