As Brexit
uncertainty continues to unsettle confidence among clients in the private
sector, the industry is becoming increasingly reliant on public spending.
The construction
industry’s biggest three clients in 2018 were the departments of transport,
health and education according to Glenigan’s market analysis.
The Department of
Transport topped Glenigan’s ranking of the industry’s top 100 clients in 2017
and retained that position last year. The DoT let a similar amount of
contracts, but these deals were generally smaller in value as overall spending
sank by 37%.
In contrast, the 285
contracts awarded by Department of Health in 2018 was 15% more than a year
earlier but these deals were for larger construction projects, and overall
spending leapt 54%.
The Department of
Education rose six places to third in Glenigan’s top 100 for 2018 as total
construction spending increased by 74%, those three government departments
alone were responsible for letting £5.2 billion-worth of construction
contracts.
That total is
broadly unchanged on the previous year but as commercial spending has dwindled,
state spending is becoming more important. In 2018, 25% of all spending by the
industry’s leading 100 clients came just from those three government
departments.
As commercial
spending is hit by continuing economic uncertainties including Brexit, leading
developers are spending less. As a result they are sliding down Glenigan’s
ranking of the industry’s top 100 clients - and being overtaken by government
departments.
Excluding regulated
bodies such as Network Rail and Homes England, there were eight government
bodies in the top 100 clients in 2018. In 2017, there were six.
In 2018, the
Department for Regional Development in Northern Ireland, the Ministry of
Justice, the Environment Agency and the Home Office also featured in Glenigan’s
top 100 clients table.
Spending at the
Ministry of Defence shrank 59% last year. Contract awards at the Environment
Agency and Home Office also reduced but there was a 144% surge at the Ministry
of Justice as new prison projects were procured.
The devolved
governments in Wales and Scotland had previously featured among the top 100
clients, but construction spending shrank by 61% and 10% respectively last year
according to Glenigan’s contracts data.
The Welsh Assembly
and the Scottish Government are however still amongst the top 10 state
controlled construction clients in the United Kingdom.
The total
construction spending by those eight government departments ranked in the top
100 last year, totaled £6.2 billion, which is 30% of all spending by the top
100 clients.
Construction spend
by the six government departments in the top 100 in 2017 was just under £6.6
billion.
So spending by the
main government departments has dropped 5%, but private sector spending is
falling at a faster rate. This makes the state’s construction spend more
important.
In 2017, the
government departments in the top 100 were responsible for 19% of total
spending. Last year, that ratio was 30%. Given the ongoing economic
uncertainties that ratio could rise further.
