© Experian Limited All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Limited. Other product and company names mentioned herein may be the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian Limited. A prognosis for construction: James Hastings, Head of Construction Futures

© Experian Limited All rights reserved. Confidential and Proprietary 2 Where have we been… Construction has underperformed GDP in recent years, except in 2010! 2010 boosted by very strong growth in public sectors – the last hurrah before cuts begin to bite

© Experian Limited All rights reserved. Confidential and Proprietary 3 …where are we now… Output up by 2.4% overall Private housing and infrastructure most buoyant, but former growing from a still low base Start of decline in publicly funded activity

© Experian Limited All rights reserved. Confidential and Proprietary 4 …and where are we going to Even with growth of 30% in the five years to 2016, private housing output will still be 14% below its 2006 peak in real terms. Thus most impressive growth is in infrastructure, which is already at a historic high

© Experian Limited All rights reserved. Confidential and Proprietary 5 How are we getting there? – the macro environment... Source: Experian

© Experian Limited All rights reserved. Confidential and Proprietary 6...key risks...  Sovereign debt crisis returns  Efforts to restore government and consumer finances constrains growth  Loosening monetary policy fails to stimulate economic activity  Savings ratio rises further as households become more defensive  Inflation reversal undermined by gains in oil and other commodity prices  Job shedding is worse than expected

© Experian Limited All rights reserved. Confidential and Proprietary 7...slowly! Strong growth in activity between peak nearly 14% above 1989 peak in real terms Depth of recession means that output still 2% below 2007 peak in 2016 on current forecasts

© Experian Limited All rights reserved. Confidential and Proprietary 8 Public housing will not be driving growth Sharp downturn kicks in this year AHP funding only £4.4bn compared with £8.4bn for period Social housing providers expected to source financing from other sources

© Experian Limited All rights reserved. Confidential and Proprietary 9 Demand/supply mismatch continue to grow After a decade of variable growth, private housing activity shot up on the early 2000s However it fell very sharply during the recession and on current projections will still be 14% below its 2006 peak in 2016

© Experian Limited All rights reserved. Confidential and Proprietary 10 Boom time continues for Infrastructure work Output already at new historic high but predicted to grow by further 20% to 2016 Crossrail activity not due to peak until 2013/14 By the time it starts declining new nuclear build should be off the mark

© Experian Limited All rights reserved. Confidential and Proprietary 11 Public works moves in the opposite direction Sector dominated by education work in recent years – 2011 share 57% BSF ‘legacy’ projects has kept activity up but these are now beginning to complete Output back down to around 2002 level by 2014

© Experian Limited All rights reserved. Confidential and Proprietary 12 The demise of industrial construction? Over past three years levels of industrial construction have been at their lowest since the data series began in 1955 in real terms Growth very moderate over the forecast period and what there is driven by warehouses

© Experian Limited All rights reserved. Confidential and Proprietary 13 Unexciting times for commercial construction Output in 2011 only 76% of 2008 peak On our current forecasts will still be 15% below 2008 peak in 2016 Most of the growth in the sector in the offices market

© Experian Limited All rights reserved. Confidential and Proprietary 14 Wither the retrofit market? Overall housing RM&I market has been on a downward path since the mid- 2000s Bulk of Decent Homes programme completed by April 2010 Little sign of retrofit agenda having a significant impact on growth as yet

© Experian Limited All rights reserved. Confidential and Proprietary 15 Wither the retrofit market...again? Expenditure cuts likely to have negative effect on public R&M levels Private players cut back on routine and cyclical maintenance during recession However sooner or later routine maintenance becomes essential work

© Experian Limited All rights reserved. Confidential and Proprietary 16 Construction likely to underperform over the next five years compared with pre-recessionary period

© Experian Limited All rights reserved. Confidential and Proprietary 17 The north/south divide returns to construction...

© Experian Limited All rights reserved. Confidential and Proprietary 18...because...  Public services tend to take a larger share of the economic cake in the northern English regions, thus cuts affect them disproportionally  Regions which benefitted strongly from the early stages of the BSF programme will see public non-residential output fall further  Major infrastructure projects are tending to be ‘greater’ south-east centric  Growth in the commercial sector is likely to be stronger in the greater south- east than elsewhere in England

© Experian Limited All rights reserved. Confidential and Proprietary 19 Conclusion Economic growth below trend Infrastructure the star of the show Jury is out on retrofitting boost to industry Public/private divide in future performance Significant north/south divide

© Experian Limited All rights reserved.