Строительство в экономике Великобритании - преимущества инвестиций

Construction in the UK economy – the benefits of investment

Introduction

Impact on economic activity

Contribution to employment

Benefits of investment

Conclusion

About UKCG and L.E.K. Consulting

Construction in the UK economy

Page

31UK Contractors Group.  Construction in the UK economy. 2

Introduction

This study has been commissioned by the UK Contractors Group and was conducted during August and

September, 2009

The objectives of this study are to demonstrate the impacts of the UK construction industry on the UK economy, and specifically to highlight the benefits of investing in construction

The key areas covered by the study include:

- the significant contribution that construction makes to the UK economy, both at a national level and in supporting the regions

- the key contribution that construction makes to UK employment

- the enabling role that construction plays in realising a range of broader economic and social objectives

Construction in the UK economyUK Contractors Group.  Construction in the UK economy. 3

The construction industry is vital to the overall UK economy, but is suffering

heavily in the recession

Construction* is a major contributor to UK GDP (directly c. 8.5% in 2008, rising to c.10% overall* when the entire value chain

is considered) and a driver of historical GDP growth

The construction industry value chain consists of c.300,000* firms, including many small- and medium-sized family and local

businesses

- the sector employs c.3 million* people in a multitude of roles representing 8% of UK employment

- a significant proportion of construction employees (>60%) are low-skilled labourers with relatively limited alternative

employment opportunities

Construction is also an important driver of growth for other sectors, without which there would be a loss of domestic

production capacity and skills

UK government investment has played an important role in growing the UK’s capital stock

- government investment in construction has historically focused on infrastructure, education, housing and health

- government has historically represented 30-40% of construction demand

Compared to its European counterparts, the UK has suffered from a more pronounced decline in construction activity since

the onset of the recession

- the impact on the construction sector is already apparent through sharp increases in company closures (an increase of

over 40% between Q4 2008 and Q1 2009) and individual bankruptcies and redundancies (an increase in bankruptcies

of c. 35% between Q4 2008 and Q1 2009 and a redundancy rate of 28 per 1,000 employees in Q1 2009 – the highest

amongst UK industries)

Note: * Construction here refers to the whole construction value chain defined as being the UK Standard Industrial Classification of Economic

Activities (SIC, 2003) codes 45 (construction) and 74.2 (architectural and engineering activities) and the construction products sector

Source: ONS; BERR; Annual Business Inquiry; Registry Trust; Insolvency Agency; Financial Times; L.E.K. analysis

Construction in the UK economyUK Contractors Group.  Construction in the UK economy. 4

The construction industry value chain consists of c.300,000 firms employing

over 3 million people in a multitude of roles

Professional

services*

Site preparation,

construction,

improvement and

repair

Construction

products

and

materials

Planning,

architecture and

design

Civil and structural

engineers, quantity

surveyors

Project planning and

management

New build and repair and

maintenance of both

residential and nonresidential buildings,

including specialist trades,

e.g., bricklaying, roofing,

scaffolding

Extensions, site

preparation, major

alternations and

enhancements

Civil engineering:

construction of roads,

railways, runways, bridges

and tunnels, harbours,

canals, drainage systems

Supply of basic

materials, e.g.,

aggregates and

cement

Supply of value

added building

materials and

building products,

e.g., bricks, blocks,

pavings

Note: * Architectural & engineering services and related technical consultancy; Professional services output is calculated as a ratio of

total turnover and assumes that architects and consultants contribute 80% of output in SIC code 74.2

Source: BERR; DTI; ONS; Construction Products Association (CPA); Annual Business Inquiry

Installations and

services

Installation of fixtures and

fittings, including gas

fittings, plumbing, heating

and ventilation plant,

sound and heat insulation,

electrical fixtures and

fittings

Painting and decorating,

glazing, plastering, tiling,

on site joinery and

carpentry, flooring,

plumbing, etc.

c.300,000 c.2,200,000 c.650,000

c.£21bn (2007) c.£124bn (2008) c.£50-55bn (2008)

c.30,000 c.230,000 c.30,000

Stage

Role in

value

chain

Employees

Firms

Output

Construction in the UK economyUK Contractors Group.  Construction in the UK economy. 5

The report is structured in three parts that, together, support the overall message

Impact on economic activity

- Construction is one of the best ways of stimulating economic activity – not just in the construction

sector, but across the economy as a whole, including troubled manufacturing sectors. It also has one of

the lowest levels of imports, so the stimulus spending stays within the national economy

Contribution to employment

- Construction is the best sector for stimulating employment. The employment that construction provides

benefits lower skilled and young workers who have relatively few alternative opportunities. Many

regions are heavily dependent on construction jobs

Benefits of investment

- Construction is not only immediate economic production, it is also investment rather than consumption,

which provides significant long-term economic and social benefits

1

2

3

Government investment in construction is the most beneficial use of stimulative public expenditure

in both the short and longer term, and any reduction in construction expenditure would have

significant immediate and enduring negative consequences for the UK

Construction in the UK economyUK Contractors Group.  Construction in the UK economy. 6

Construction is one of the best ways of stimulating economic activity

Impact on economic activity

Construction* is a major contributor to UK GDP (directly c. 8.5%* in 2008, £124 billion)

Construction has been a significant contributor to historical UK output growth

The construction industry is a driver of growth in other sectors due to its heavy reliance on an extended and varied

supply chain

£1 spent on construction output generates a total of £2.84 in total economic activity (i.e. GDP increase)

In addition to the economic benefits, every £1 invested in construction provides financial returns to the Treasury in tax

income and benefit savings

In the short term, construction is one of the most effective sectors in which the government could invest to stimulate

economic activity

Compared to other sectors, construction relies little on imports; hence, investment in construction is more likely than

other sectors to generate additional economic activity within the UK

Private construction output is very sensitive to changes in GDP; private activity has contracted sharply in the current

downturn, causing reductions in GDP and employment

Private sector construction spend is falling faster than in previous recessions; CVAs, receiverships and bankruptcies in

the construction sector have increased since the onset of the current recession

Construction has had the greatest increase in redundancy rate in the UK since the start of the current recession

Even if current government plans in construction are maintained, construction output is expected to fall significantly

over the next 2-3 years.  Any reduction in public expenditure would exacerbate this problem

1

Note: * Construction is defined here as SIC code 45 and excludes construction products and business services, e.g., architecture and surveyingUK Contractors Group.  Construction in the UK economy. 7

Construction is a major contributor to UK GDP (c. 8.5% in 2008, £124 billion)

Percent

90

80

70

60

50

40

30

20

10

100

0

Public works

Public housing R&M

Public non-housing R&M

New housing public

Public infrastructure

Private commercial

Private housing R&M

Private non-housing R&M

New housing private

Private infrastructure

Private industrial

Construction*

£124bn

GDP

£1,443bn

Note: * Construction is defined here as SIC code 45 and excludes construction products and business services, e.g., architecture and surveying;

** Construction output for GB only

Source: ONS

Construction’s* total output includes

c. £80 billion of direct value-add and

c. £44 billion of intermediate consumption

- intermediate consumption comprises

the total amount of materials and

services used in construction, including

sub-contracting services

UK government investment has historically

driven 30–40% of construction output

Construction contributes a net trade surplus

to the UK (£223m in 2008)

- little construction output is imported;

increased construction demand is

therefore more likely to directly benefit

domestic UK firms

- furthermore, construction supports

high-value net-export service sectors

such as engineering consultancy and

design, architectural activities, and

property management

Construction

UK GDP and construction output**

(2008)

8.5%

Private

Public

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 8

Real change in UK GVA by sector

(1994-08)

Note: * GVA plus taxes minus subsidies is equivalent to GDP; ** Other business services includes non-financial professional services, e.g.,

marketing; *** Construction is defined as SIC code 45 and excludes construction products and business services, e.g., architecture and surveying

Source: ONS; L.E.K. analysis

900

1,300

1,250

1,200

1,150

1,100

1,050

1,000

950

Billions of 2007 pounds

0

Mining & quarrying inc. oil and gas

1994

2008

Government

Manufacturing

Other business services**

Real estate activities

Financial and insurance

Construction***

Wholesale and retail trade

Computer and related activities

Other services and equipment rental

Recreational, cultural and sporting

activities

Hotels and restaurants

Sales, maintenance & repair of

motor vehicles

Transport

Post and telecommunications

Electricity, gas, oil and water

supply

Agriculture, forestry and fishing

Construction contributed c.10% of total

UK GVA* growth between 1994 and

2007, and is an important driver of

growth in other sectors of the economy

Much of the growth in total UK GVA in

recent years can be attributed to

government, financial and real estate

sectors

The high growth in these other sectors is

unlikely to be sustainable

Furthermore, other traditional sectors of

the economy, e.g., manufacturing, have

been in decline

Construction has been a significant contributor to historical UK output growth

One of the highest

sustainable

contributors to our

long-term economic

growth

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 9

The construction industry is a driver of growth in other sectors due to its heavy

reliance on an extended and varied supply chain

Consumption of output from other sectors by

construction in purchaser prices (2007)

The construction* industry uses a wide range of

inputs from many industries to produce its goods and

services

Investment in the construction industry therefore

indirectly supports a broad set of industries as the

increase in final demand filters through to key

industries which supply the sector

In particular, the following sectors are amongst those

that benefit most from increases in construction

activity:

- aggregates

- renting of machinery

- real estate

- architectural and technical consultancy

- plastic products

- wood products

- metal products

- mining and quarrying

Note: * Construction is defined as SIC code 45 and excludes construction products and business services, e.g., architecture and surveying

Source: ONS; L.E.K. analysis

10

20

30

40

100

90

70

60

50

0

2007

Percent

80

Other

Banking and finance

Structural clay products

Market research, management consultancy

Motor vehicle distribution, repair, fuel retail

Other business services

Other mining and quarrying

Structural metal products

Wood and wood products

Plastic products

Architectural activities and technical consultancy

Owning and dealing in real estate

Renting of machinery

Aggregates

£28.7bn

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 10

Source: ONS (2002); L.E.K. analysis

Investment

in

construction

Direct

impact

Indirect

impact

Induced

impact

£1 £1 £1.09 £0.75

The type I output multiplier is a measure of the direct and indirect effects associated with an additional £1 spend on a particular sector. The type I

multiplier for construction in the UK was estimated by the ONS to be 2.09

Type II multipliers include the induced impacts associated with the increased economic activity and income in the economy. This has been

estimated by L.E.K. based on income tax and National Insurance rates, indirect taxes, savings ratios, and import share of disposable income

Indirect impact

Supply chain impacts of construction

and their knock on effects, i.e.,

increase in output and income up and

down the supply chain

Sectors that benefit from increased

construction output include

manufacturing (especially of building

products and equipment), real estate,

business services (including

architecture, planning and surveying),

mining and quarrying, and

transportation

Induced impact

Increase in household income as a

result of increased employment /

income in construction and other

sectors leads to increase in spending

and demand / output in the overall

economy

Direct impact

Wage income and corporate profit

generated in the construction sector,

plus spend on non-labour inputs

£2.84

£1 spent on construction output generates a total of £2.84 in total economic

activity (i.e. GDP increase)

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 11

In addition to the economic benefits, every £1 invested in construction provides

financial returns to the Treasury in tax income and benefit savings

Note: For new buildings (the tax and benefits effects are c. 1p higher for renewals and maintenance); * Not included in total; ** Excludes benefit allowance

savings; Indirect tax effects have been calculated by multiplying the additional tax earnings for each sector from spending £1 by their contribution to the

indirect impacts of construction (i.e., the £1.09 of the construction type I multiplier); The induced effect has been calculated by multiplying the median

additional tax earnings from £1 investment in sector output by the induced output effect associated with £1 investment in construction

Source: ONS; Oxford Economics; L.E.K. analysis

Benefits 0.23

0.56

Total tax from induced effects 0.08**

Total tax income and benefits

savings to the Treasury

Direct effect

0.12**

0.36

£

Estimated returns to the Treasury

from investing £1 in construction

Total tax from indirect effects

Corporation tax 0.01

0 - 0.02*

0.12

Total direct tax and benefits savings

Stamp duty

Income tax and NI

Taking into account direct, indirect and induced tax

effects allows us to estimate the net financial costs to the

Treasury from spending £1 supporting the construction

industry

These estimates assume that increased demand in the

economy would reduce current unemployment which is

likely to be the case at current levels of depressed

economic output

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 12

Note: Sectors selected are ones for which the government is a major provider (e.g. education) or ones which have received or are likely to receive

significant government support (e.g. banking and finance); * Local or Central Government industry sectors, which have different production

assumptions than market sectors

Source: ONS (1995 – the last time the analysis was undertaken; published in 2002)

In the short term, construction is one of the most effective sectors in which the

government could invest to stimulate economic activity

1.0 1.2 1.4 1.6 1.8 2.0 2.2

Postal and courier services

Public administration and defence*

Education*

Forestry

Social work activities*

Banking and finance

Shipbuilding and repair

Motor vehicles

Agriculture

Construction

Health and veterinary services*

Railway transport

UK type I output multipliers by selected sectors

£1 of output by construction generates demand for the

supply of products and materials used in the construction

process, as well as demand for professional services

The type I output multiplier is a measure of the direct and

indirect effects associated with an additional £1 spend on

a particular sector. The ONS estimates the construction

output multiplier at 2.09

- sectors that benefit from increased construction

output include manufacturing (especially of

building products and equipment), real estate,

business services (including architecture,

planning and surveying), mining and quarrying

and transportation

In addition, the wealth generated in these sectors induces

further, broader beneficial impact on the wider economy

(not captured in the type I multiplier)

Construction has one of the highest output multipliers

among sectors that are candidates for government

support. This makes it one of the most effective ways of

stimulating the overall economy

2.09

Multiplier

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 13

Note: Construction is defined as SIC code 45 and excludes construction products and business services, e.g., architecture and surveying

Source: ONS; L.E.K. analysis

Compared to other sectors, construction relies little on imports; hence,

investment in construction is more likely than other sectors to generate additional

economic activity within the UK

Imports as a percentage of intermediate consumption

(2007)

The construction industry typically imports a

very low proportion of intermediate

consumption, much lower than that many

other industries

- in 2007 construction imported less

than 8% of its supply, while UK

manufactured motor vehicles

imported nearly 28%

The low proportion of imports in the

construction industry means that for every

pound invested in construction, nearly all of

it will be retained in the UK

- for other industries, with a high

percentage of imports (e.g., the motor

manufacturing industry), a much

higher proportion of any government

support will be “leaked” abroad

Average for all

industries

0

5

10

15

20

25

30

Motor vehicles Shipbuilding Healthcare C Education onstruction

Percent

UK manufactured

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 14

(8)

(6)

(4)

(2)

0

2

4

1Q 2002

1Q 2003

1Q 2004

1Q 2005

1Q 2006

1Q 2007

1Q 2008

1Q 2009

(4)

(3)

(2)

(1)

0

1

2

Construction output quarterly

percentage change

GDP quarterly

percentage change GDP

Construction

output

Construction output and GDP quarterly

percentage change*

(1Q 2002-2Q 09)

The decline in private construction activity since the onset

of the current economic downturn has led to reductions in

GDP and employment

“… The sharp fall in the UK economy is being blamed

primarily on the construction and manufacturing sectors.

Construction output fell by 6.9% over the quarter,

compared with the fall of 5% in the previous quarter.

Output in the service sector also fell by 1.6% …”

ICM, June 2009

“… Around half the [GDP] revision in the latest quarter is a

result of new construction output data …”

ONS, 1Q2009

“… Employers in the construction sector were most likely to

be operating either a partial or organisation-wide

recruitment freeze (81%) … Over half (54%) of

construction companies are putting graduate recruitment

on hold, as the sector reacts to declining demand for new

build projects  …”

CBI, June 2009

“… Construction employment began to fall in 2008 with a

decline of 1% over the year, however, the CSN forecasts

a much larger drop of 15% across 2009 to 2010, with the

largest losses (around 13%) expected in 2009. The total

number of construction job losses from 2009 to 2010

could be up to 450,000 if output contracts by the

suggested higher rate of 12% in 2009  …”

Construction Skills Network, July 2009

Private construction output is very sensitive to changes in GDP; private activity

has contracted sharply in the current downturn, causing reductions in GDP and

employment

Note: * 2005 prices; Seasonally adjusted; Includes repair and maintenance

Source: 2009 Work patterns in the recession report, CBI; Institute of Commercial Management; 1Q2009 National Accounts briefing note, ONS

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 15

Private sector construction spend is falling faster than in previous recessions;

CVAs, receiverships and bankruptcies in the construction sector have increased

since the onset of the current recession

Number of quarters from technical start of recession

Private construction output during recessions

Current recession

Early 1990s recession

Early 1980s recession

Note: * Construction only; Infrastructure is attributed solely to public after 1Q1980; Early 1980s recession excludes housing; Nominal prices

Source: ONS; BERR; Registry Trust; Insolvency Agency; L.E.K. analysis

0

20

40

60

80

100

Number of companies

Q1

50

Q2

57

Q3

68

Q4

97

Q1E

44

Q4

25

Q3

22

Receiverships

CVAs

Company voluntary arrangements and receivership appointments*

(3Q 2007-1QE 09)

2007 2008 2009

0

150

300

450

600

750

Number of people

Q3 Q4 Q1 Q2 Q3 Q4 Q1

Bankruptcies amongst self-employed*

(3Q 2007-1QE 09, not seasonally adjusted)

2007 2008 2009

40

60

80

100

120

140

(4) 8

Index

(12) (8) 0 4 12 16

Private output is

falling at a faster

rate than in

previous

recessions

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 16

0

1

2

3

4

4Q 2007

1Q 2008

2Q 2008

3Q 2008

4Q 2008

1Q 2009

2Q 2009

The construction sector has had the greatest increase in redundancy rate in the

UK since the start of the current recession

Redundancy rate (per 100)

Construction

PPT change in

redundancy rate

(Q42007-Q209)

2.2

Note: * No data available for certain quarters when sample sizes are too small to provide estimates; Not seasonally adjusted

Source: ONS; Financial Times

UK redundancies by industry

(1Q 2007-2Q 09)

Manufacturing

Financial intermediation and

business services

Distribution, hotels and restaurants

Transport and communications

1.2

1.2

0.5

n/a*

UK total 0.1

The construction sector has had the

highest redundancy rate in the UK

(c. 28 per 1,000 employees) since

the start of the current recession

- construction's redundancy rate is

c.40% greater than manufacturing

and c.50% greater than financial

intermediation and business services

“… The construction industry has endured a

prolonged period of discomfort, as a

sharp slowdown in house building and a

drying up of new commercial building

projects has caused an estimated 16 per

cent decline in output during this year,

making it the country’s leading source of

redundancies during the recession  …”

Financial Times,

10 September 2009

Public administration, education

and health

0.1

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 17

Even if current government plans in construction are maintained, construction

output is expected to fall significantly over the next 2-3 years.  Any reduction in

public expenditure would exacerbate this problem

Note: * CAGR is for gross public expenditure only (excludes change in private output); Includes repair and maintenance work; All

infrastructure is accounted for in public expenditure; Current prices; Calculated using CPA growth rates and adjusted for inflation;

Source: ONS; CPA; HM Treasury; L.E.K. analysis

CPA (summer 2009)

forecasts large falls in

private construction

output 2009-13,

particularly in the offices,

retail, factories and

warehouse subsectors

CPA’s public construction

output forecasts are

based on government

budgets, adjusting for

government departments’

historical performance in

actual spend compared to

plan, and an industry

expert panel’s current

views on project and

funding status

Under this CPA forecast

scenario, construction will

suffer from a marked

decline in output levels in

spite of the assumed

relatively constant

government investment

0

20

40

60

80

100

120

140

1985 87 89 91 93 95 97 99 01 03 05 07 09F 11F

Total construction output and gross public expenditure

(1985-12F)

Billions of pounds

Public output

- CPA current

expectation

Private

output

6.4

CAGR%

(2002-08)

6.9

6.7

CAGR%

(2008-12F)

(4.4)

(1.5)

(6.1)

Total

Forecast

Gross public

expenditure

(plus private

output)

(3.4)*

Impact on economic activityUK Contractors Group.  Construction in the UK economy. 18

Construction is the best sector for stimulating employment

Contribution to employment

Construction employs c.8% of the UK workforce, and has been a major contributor to employment growth

Due to its labour intensity, additional spending on construction output can generate more employment opportunities

than other sectors that have recently received significant government support