Transcript UK GDP 2004-2009

Richard Diment
Federation of Master Builders – UK
EBC Congress 2009
Content
 Overview of the impact on the
construction sector in the UK
 FMB’s proposals
 What has the UK government done so
far
 What is likely to happen next
UK GDP 2004-2009
2009 Q1
2008 Q4
2008 Q3
2008 Q2
2008 Q1
2007 Q4
2007 Q3
2007 Q2
2007 Q1
2006 Q4
2006 Q3
2006 Q2
2006 Q1
2005 Q4
2005 Q3
2005 Q2
2005Q1
2004 Q4
2004 Q3
2004 Q2
2004 Q1
Impact on the construction
industry in the UK
All work (2005=100)
110
105
100
95
90
85
80
75
And in the sectors that FMB
members work predominantly
150
130
110
90
70
50
Private Housing
Private Commercial
R&M Private Housing
-80
Q4
Workload
Employment
-40
-60
Enquiries
Q2
2009 Q1
Q4
Q3
Q2
2008 Q1
Q4
Q3
Q2
2007 Q1
Q4
Q3
Q2
2006 Q1
Q4
Q3
Q2
2005 Q1
-20
Q3
Weighted % balance
The views of FMB members
Key indicators
40
20
0
Other key economic indicators in
the UK
 Return to pre-recession activity levels in construction





sector not expected until 2013
Inflation low (CPI currently 2.3% - 0% by year end – rising
to 1~2% by 2012)
Public expenditure deficit unsustainably high (forecast at
£175bn – 12.5% of GDP - for 2009/10)
Public sector deficit likely until 2017
Central bank base rate 0.5% (down from 5% in mid-2008) –
lowest rate since central bank set up in 1694!
House prices down by about 20% in 18 months – 1 in 9
householders estimated to be in negative equity
The industry’s response
 Cross industry alliance of 30
Trade Associations , Material
Suppliers and Trade Unions
 Clear message to all politicians
that unless they act quickly,
thousands of companies and
tens of thousands of jobs will
be lost
 Industry will not be in a
position to tackle the UK’s
building needs when recovery
comes
Our 10 Point Plan/1
 Get the banks lending to responsible borrowers
 Cut VAT to 5% for all building repair and maintenance
work
 Produce a coherent plan for modernising the existing
housing stock
 Targets for local authorities to release land for social
housing
 Simplify the planning process
10 point plan/2
 An implementation plan for school, hospital and
prison upgrading in 2009-10
 S206 agreement holiday - Abandon Community
Infrastructure Levy
 Reduce the regulatory burden. Make it easier for SMEs
to win public contracts.
 Reform stamp duty
 Reintroduce empty property rate relief
The scope for sustainable
refurbishment
 21m (out of 25m existing homes) likely to still be in use
in 2050
 Few of them are environmentally efficient
 Need to reduce emissions of those existing homes by
around 75%
 Similar work needed on non-housing
building stock
Other immediate problems
Social
 Lengthy and growing social housing waiting lists
 Millions in fuel poverty and/or living in substandard homes
An industry in crisis
 Biggest downturn for building in 80 yrs
 Thousands of jobs at risk
 Training in freefall
 Real fears about future capacity
A win-win-win situation
 Improve environmental performance of existing stock
to meet carbon target
 Improve the housing conditions of millions and reduce
fuel poverty
 Get Britain Building again
 Give Britain’s builders – and the next generation – the
skills to make our buildings sustainable
Building a Greener Britain
 A whole new market
 Modernise the existing
building stock
 Up to £6bn a year
 Audit of property
 Knowledgeable
builders
 Intelligent customers
 Financial incentives
What has the UK Government done?
 Slow to react – very little construction sector specific
 Priority has been to stabilise the financial sector
 Interest rates at 300yr + low
 Fiscal stimulus
 Purchased a major share in several big banks
 Reduced VAT from 17.5% to 15% from 1 Dec 2008 to
31 Dec 2009
 Quantitative easing – up to £150bn agreed for asset
purchasing - £125bn used to date
 Support for SMEs to defer tax bills
Sector specific initiatives
 Brought forward some public expenditure – social
housing, schools & hospital building into 2009-10 –
but no additional money over 2008/09-2010/11
 Some extra money (£100m) in funding for
improvements to social housing
 £500m to support restarting work on ‘mothballed’
house building sites
 Extended ‘stamp duty’ holiday
 Changes to permitted development rights
 Commitment (by 2030) to improving housing stock –
no new money as yet
Prospects for the building sector
 Recovery will come – best guess recovery to 2007 levels
by about 2013
 Massive housing crisis – both quality + quantity
 Commitment to upgrade the building stock 2013-2030
 Urgent need for infrastructure improvements – but
SME builders don’t usually have civil engineering skills
 UK must have GE by June ‘10 – change of Govt likely
 Risks – need to reduce public expenditure deficit– less
state money available + higher personal/business taxes
 If inflation rises – what will happen to interest rates?
Recession is expected to end by late ‘09/early ‘10 but
recovery to pre-recession levels unlikely before late 2011
The nightmare to be avoided
Thank you
Any questions?