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2016 forecast for the UK construction and building trade

2016 looks set to be a good year for building and construction in the UK. After several gloomy years, this sector has been boosted by factors including long-term spending pledges by the government for infrastructure and the boom in house building. There are a number of factors contributing to the outlook for the UK construction and building trade in the year ahead, many of them positive.

Commercial sector

As the UK economy continues to recover from the 2008 crash, there's a rise in demand for construction and building services by the commercial sector. The recovery is not yet assured, however.

Infrastructure and government policy

Two government actions offered a boost to the construction sector. Firstly, the Chancellor pledged £12bn in infrastructure spending spread over the next five years. Secondly, the government committed further to housebuilding programmes on greenfield and brownfield sites. These two forces have combined to boost the construction industry over the next few years. There are also major civil projects, such as the Thames Tideway Tunnel and Hinkley Point nuclear power station, planning intense activity over the next few years; these should afford work to many in the civil engineering sector.

House building

London's housing market seems saturated but the release of land by the government for house building projects is likely to provide a boost to this sector. The UK desperately needs new homes but it's expected that new housebuilding will mostly occur outside the capital, where the top end of the market is losing steam thanks to the Brexit threat and other factors. Most economists blame government policy for the shortfall in houses: it's so far proved inadequate at enabling the construction industry to build enough to fulfil demand.

Economic recovery

After a seven month dip in the latter half of 2015, the construction sector picked up at the end of 2015. It's likely the improved economy is going to provide the confidence the commercial sector needs to push forward with construction and building projects this year, provided the recovery is sustained.

Flooding

Some trades are also likely to be boosted by demand for services in the flood-affected areas, especially in the North of England. With flood damage from December 2015 and the early days of 2016 estimated to be around the £5bn mark, there is going to be demand for building trades and services. Some of this will be boosted by government funds to help the affected. Over the longer term, it's likely there will be a debate about how to help flood-affected communities. Arranging for the construction of better flood defences may take some time to organise and fund, so we might not see this work start this year.

There remain challenges to the building and construction sector.

The economic recovery remains somewhat fragile, and there are skills gaps looming as employment rises. There's also an interest rate rise on the horizon, which could negatively impact on some projects. The outlook for 2016 is likely to be fairly positive, and there's already anecdotal evidence of the industry improving.

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