Help to Buy Scheme to boost UK construction sector in the short term, but further measures should be taken to sustain growth, reports Mintel

The effect of the Government’s Help to Buy scheme on the UK construction market has been highlighted today as the market opens up to more first time buyers. Indeed, new research from Mintel reveals that the market for private housing is valued at £18 billion in 2013 – but is set for a further 8% growth in 2014 and 9% growth in 2015 as the scheme is taken up – to reach £21 billion in 2015.

Private housing output was strongly increased in 2013 (up 11% year on year in value terms) in line with the launch of the Help to Buy Scheme after a modest reduction in 2012. This represented a return to the recovery evident in 2010 and 2011 which had followed the major reductions in 2008/09 at the depths of the economic slowdown.

Total construction activity in the UK reached £105 billion in 2013, representing growth of 3% in the year. Nonetheless output remained below the levels recorded in 2011, reflecting the difficulties the sector suffered in 2012. Total construction output is now expected to enjoy a period of sustained growth, ahead of the overall GDP (Gross Domestic Product) development in the UK. Indeed, Mintel forecasts the total construction market is set to grow 16% to 2018 to reach £128 billion.

Terry Leggett, Senior Industrial Analyst at Mintel, said:

“The prospects for the UK construction sector are now very strong. There is no doubt that conditions are now right for growth in a sector that has suffered more than most in the past few years, but equally outperforms average growth when market conditions are positive. There continue to be restrictions on public expenditure, and it is the private sector that will be the strongest performer over the next few years.”

“However, growth may be hampered in the private housing sector as the effects of the 2013 government-introduced initiatives to boost activity fade unless there are further measures introduced, which appears unlikely in the light of overall economic forecasts. While the Help to Buy Scheme will undoubtedly give a boost, uncertainties remain concerning future private house building activity. The scheme is due to close in March 2016, and may finish earlier if all funds are taken up.”

With house price inflation acting as a stimulant to house improvement, Mintel’s research reveals that the market for private housing repair and maintenance is also set to benefit. Indeed, the market is forecast to grow from £16 billion in 2014 to £17 billion in 2015 – and set to see further growth to reach £19 billion by 2018.

“Repair and maintenance output in the private housing sector is continuing to be subdued by tighter credit restrictions than were evident prior to the banking crisis, but as the economy slowly improves and house price inflation increases, then so too does the potential of the market. Relaxed planning permissions and the effects of the Help to Buy Scheme are also benefiting this sector.” Terry continues.

Meanwhile, the office construction sector of the private commercial market is regaining strong growth – while still not reaching the heights of pre-recession. Indeed, the sector grew 12% year on year to 2013 to reach nearly £7 billion – and is forecast to grow a further 39% to 2018 to reach more than £9 billion – still less than three quarters (74%) of its pre-recession value in 2008 of just under £13 billion.