tmgroup: the collaborative new dawn of new build
The wider economy and new build
New build starts and future developments are inextricably linked to the success of the wider economy. Economists and construction experts have found that, historically, 2% annual growth in the UK’s Gross Domestic Product (GDP) is a driver for growth in construction output. Unfortunately, the last time the UK exceeded 2% was prior to the referendum in 2016 when 2%, 2.9% and 2.3% GDP growth was created in the economy in 2013, 2014 and 2015 respectively. Post referendum, a struggling pound sterling, reduced consumer and business confidence and political uncertainty has restricted GDP growth to 1.8% in both 2016 and 2017 and falling to 1.4% in 2018.
As the March 29th Brexit deadline was pushed back to October 31st, HM Treasury compared 23 economic forecasts for the UK economy in 2019 and 2020. Unsurprisingly, Brexit and the very real prospect of a no-deal exit scenario has significantly depressed the expected growth with 1.3% GDP growth in 2019 rising slightly to 1.4% in 2020.
These economic projections infer that construction and the new build sector will be significantly affected by the wider economic picture. Without the referendum result, the UK was on course to maintain its trajectory of +2% annual GDP growth which would have helped the new build sector to grow. Trapped in a Brexit quagmire, the sector is being forced to confront: uncertainty affecting the price of materials and the ability to import easily, a reducing skilled labour workforce as experienced foreign specialists leave the UK, declining investor enquiries and a potential drop in consumer demand.
Whilst this may seem apocalyptic, the new build property sector is resilient and determined to control its own destiny. Despite a short-term 1% contraction in construction output in 2019, the sector is predicted to recover and improve by 5% in 2020. Before speculating on improvements to collaboration in the sector, it is vital to understand the current market restrictions set to impact all stakeholders in the new build process and the changing emphasis and trends of construction starts in both the residential and commercial sectors.