United Kingdom

This market study is a comprehensive analysis about the construction industry in the United Kingdom, an island country located in Western Europe. Through this study, political, economic, socio-cultural, and technological factors (PEST) are analyzed. Among these, factors like the country’s unique governmental system, the impact of COVID-19, its aging population, the effects of Brexit, and low R&D expenditures are found to be of great importance to the country's successes and hardships. The team has also identified that the spread of labor shortages throughout the UK’s construction industry will worsen over time due to the retirement of a large portion of the workforce.

The UK’s infrastructure is one of the most developed and extensive in the world. However, many infrastructure facilities are starting to reach their end of service life due to increased expectations and changes in technology. Additionally, there has been a shift to more public-private partnerships type projects, in order to shift the financing weight to the private sector and overcome budget shortages. The team has emphasised importance in major roads and highways, airports, and seaports, water treatment plants and ultimately, power and rail projects to identify the country’s infrastructure status. The roads and highways’ existing infrastructure is around 262,300 miles and has an expected investment of £14 billion for expansion projects. As for the country’s international ports and airports, these are mainly owned and maintained by the private sector with some oversight of the Department of Transportation. The major airport, Heathrow Airport in London, is expected to start an expansion project that will raise passenger capacity from 85.5 million to almost 130 million. Additionally, there has been a growth in water treatment plants due the increase in water demand (some due to climate change). The energy infrastructure sector is also growing due to the shift in paradigm towards clean energy, adapting infrastructure that produces more renewable energy to reduce the dependency on fossil fuels. Lastly, the Railway Network has a £30.75 billion procurement pipeline underway, in order to improve connectivity, trade and commerce.

 

Diving deeper into the construction market, it has been identified that this industry is a major contributor to the UK’s GDP, producing nearly £100 billion in 2020. The revenue of this industry has grown 3.9% on average each year, making it the second-fastest growing industry in the country. Most of the value generated in this industry is produced by the private sector (73.9%) compared to the public sector (26.1%), as seen on the graphic below. Moreover, the Infrastructure and Projects Authority (IPA) has estimated a total infrastructure investment of nearly £650 billion over the following 10 years. With this, the team expects future investment to flow mostly into public projects than private ones.

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Other key trends encountered have been the increasing price of materials due to supply chain issues created by labor shortages and increased global construction material demand. Equipment sales, on the other hand, have been restored to pre-pandemic levels and expected to increase due to the increasing construction demand. Also, it has been identified that the Netherlands provides the greatest amount of foreign investment to the UK’s construction industry, at £116 million.

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Special topics in construction are a big component of this market study. New project delivery methods, integrated strategies, the shift to more sustainable practices, and technology as a key player in the construction industry are analyzed to further understand market opportunities and key practices. Design-bid-build, design-build, construction management, and public-private partnerships are the common project delivery methods utilized within the UK construction industry. Yet, integrated methods like the Private Finance Initiative (PFI), which is an enhanced version of the public-private partnership model, is becoming more prevalent in the country. As for sustainability, there have been some major changes impacting the construction sector due to the Paris Agreement goal of achieving net-zero by 2050. There has been an increase in government funding towards green technology, new legislations to set the standard, and a peak in the public’s interest and expectations for companies to adopt more sustainable practices. There has also been a rise in incorporating technology in the construction industry, promoting innovation and more efficient ways of constructing, to both decrease the construction time and increase the service life of a project. The Construction Playbook, a government guidance document, captures commercial best practices and expectations. Our team has identified that the construction industry will continue to be a main contributor to the UK's GDP, and will provide more opportunities for construction companies to expand on, such as integrated delivery methods, green practices, and technologies. To complete this market study, a SWOT analysis, seen below, has been created to derive a set of recommendations and key takeaways.

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Based on the market study, our team recommends that the UK construction industry should incorporate green practices into new construction projects, participate in public and infrastructure projects, increase labor recruiting efforts amongst UK citizens, educate stakeholders on Construction Playbook Principles, incorporate agile construction planning and management, and participate in Private Finance Initiatives (PFIs) based upon the findings of this study

Team
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Manuela Jimenez
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Jianjun Long
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Rim Soubra
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Shalin Bessy
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Liam McAlister
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Chintan Vohra