Impact of the Recession on Construction Contractors
THE IMPACT OF THE GLOBAL FINANCIAL CRISIS ON THE CONSTRUCTION INDUSTRY
JANUARY 2009
INTRODUCTION
The current crisis in the world’s financial system has left the construction industry facing its toughest challenges for a generation. Salaries are falling; job cuts are predicted to reach 400,000 in England alone; and the impacts look set to get much worse before they get better.
No country is immune from the impact of this and the UK, and much of the rest of the world, is already in, or about to enter a recession. Even buoyant construction markets such as the United Arab Emirates (UAE) are starting to feel the effect, with construction growth rate expected to slow from 20% to 15% in 2009 (Al Mal Capital). The United Nations (UN) predicts world economic output will shrink by as much as 0.4% in 2009 (UN 's World Economic Situation and Prospects Report, 2009).
These are serious times, however, the industry needs to be prepared to contribute to the recovery by retraining workers, maintaining the highest of standards of quality and supporting innovation. Construction professionals must not lose sight of their commitment to issues of sustainability, health and safety, ethical business practices and improved building standards. These will future-proof the industry and allow it to grow after the economy recovers.
Companies seeking to find an extra edge in an increasingly competitive marketplace are likely to employ greater innovation as they look to become more efficient. This could have far reaching benefits for the industry in the future, where innovation has never been more vital.
IMPACTS AND CHALLENGES
Construction Output
It is clear that construction is in for a period of deflation. Forecasts suggest that there will be a 7% decline in output over the next three years, however, this figure is heavily contingent on Government spending coming through as planned (Construction Products Association).
In the second quarter of 2008 new order figures
JANUARY 2009
INTRODUCTION
The current crisis in the world’s financial system has left the construction industry facing its toughest challenges for a generation. Salaries are falling; job cuts are predicted to reach 400,000 in England alone; and the impacts look set to get much worse before they get better.
No country is immune from the impact of this and the UK, and much of the rest of the world, is already in, or about to enter a recession. Even buoyant construction markets such as the United Arab Emirates (UAE) are starting to feel the effect, with construction growth rate expected to slow from 20% to 15% in 2009 (Al Mal Capital). The United Nations (UN) predicts world economic output will shrink by as much as 0.4% in 2009 (UN 's World Economic Situation and Prospects Report, 2009).
These are serious times, however, the industry needs to be prepared to contribute to the recovery by retraining workers, maintaining the highest of standards of quality and supporting innovation. Construction professionals must not lose sight of their commitment to issues of sustainability, health and safety, ethical business practices and improved building standards. These will future-proof the industry and allow it to grow after the economy recovers.
Companies seeking to find an extra edge in an increasingly competitive marketplace are likely to employ greater innovation as they look to become more efficient. This could have far reaching benefits for the industry in the future, where innovation has never been more vital.
IMPACTS AND CHALLENGES
Construction Output
It is clear that construction is in for a period of deflation. Forecasts suggest that there will be a 7% decline in output over the next three years, however, this figure is heavily contingent on Government spending coming through as planned (Construction Products Association).
In the second quarter of 2008 new order figures