Five year construction forecast: Construction Skills expert view

The annual Construction Skills Network (CSN) report findings, focusing on construction activity between 2008 and 2012, reveal that construction growth will peak in 2011, as the industry rushes to complete new build and infrastructure programmes before the Olympic Games open in 2012.

The latest forecast indicates that, although the Olympic build projects account for less than 0.5% of UK construction work between now and 2012, the high profile nature of the Games is driving a concentration of activity between now and 2011. A number of unrelated projects such as the Victoria line and DLR extensions are being timed for completion in advance of 2012 to help manage the expected influx of visitors to the Capital.

This trend, combined with a natural levelling out of activity after a long period of growth, means that the industry is likely to see a year of little or no growth in 2012. However in real terms by 2012, output across the construction industry will have risen by a third since the start of the decade.

To deliver every project between now and 2012 employment levels will need to increase by 7% equating to a requirement for 88,400 new workers every year. A concentration of new recruits will be required in professional and technical staff, such as civil and mechanical engineers.

Infrastructure is the sector that will experience the most significant growth (an average of 5.8% each year) over the period. A number of large projects are now underway or in the pipeline, including the Olympic Park infrastructure work, Thameslink expansion, a £3 billion Scottish Transport Investment Programme and nearly £600m of motorway and trunk road improvements in Northern Ireland.

There will be a continuing shift in construction growth from the North to the South of England over the next five years. Although this does mean that the largest number of new construction recruits will be required in London, the South East and East of England, total percentage growth in employment will be highest in Wales and Northern Ireland. Northern Ireland's employment growth is expected to rise by 13.3%, driven by a substantial and wide reaching public investment programme. The 13.5% growth expected in Wales is due to the strength of the labour-intensive repair and maintenance (R&M) sector, particularly housing R&M, being driven by the Welsh Housing Quality Standards programme.

In fact, public sector spending will be a key driver of growth across the UK through the 2008 to 2012 period. The Government's Building Schools for the Future programme is forecast to grow by 3.7% per year a boost in spending on hospitals is expected after 2009. Public housing is expected to grow by an average 2.9% per year, driven by the need for more affordable housing and a £3bn increase in funding by the Housing Corporation

In contrast, the private housing sector will experience a reduction in growth in the period. Output in the sector declined in 2007 as the tighter credit regime, precipitated by financial institutions' exposure to the sub-prime mortgage market, began to bite. The fall will continue in 2008, followed by an expected return to very modest growth in 2009 and beyond, as the housing market remains subdued. Similarly, only a small rise is likely to be seen in the commercial and industrial construction sectors.

The potential of a more pronounced housing market decline and the increased difficulty of securing credit will affect construction as with most other sectors. The mortgage market has already been affected and as a result has impacted negatively on consumer confidence. The CSN will continue to run scenarios to keep up to date in the current climate of rapid change., including looking at the possibility of a significant house price decline and the potential re-patriation of migrant workers. It is anticipated that as part of our regular CSN model updates the forecasts will be revised downwards. This will allow us to address changes to skills and training requirements at the earliest possible opportunity but for the time being the economy's medium term outlook still appears stable providing a healthy outlook for what remains a largely positive industry.