Featured Sector: Industrial

Industrial construction was the brightest growth area during 2014. The relentless rise of e-commerce has helped fuel demand for warehousing and distribution premises, underpinning a 49% rise in the value of underlying starts last year. 

The relatively short construction periods associated with warehousing construction in particular means that the rise in project starts provides a fairly immediate boost to overall output. Indeed the Office for National Statistics recorded a 17% in  the volume of sector output in 2014 and output in the first two months of 2015 was 9% up on a year ago.

Sector prospects remain positive for the year ahead, although the pace of growth is expected to moderate.

Recent business surveys, including those by Markit/CIPS and the Confederation of British Industry show that whilst the UK manufacturing sector continues to grow, the pace of expansion is moderating. In particular more difficult conditions in key export markets, such as the Eurozone, have increased the manufacturers’ reliance on domestic demand to drive growth. The prospect of post-election tax rises and spending cuts points to weaker domestic demand growth in the second half of 2015 and in 2016.

This slowing in growth prospects appears to be prompting manufacturers to scale back earlier plans for adding capacity and investing in equipment. Given that manufacturing output in the final quart of 2014 remained 5% below its previous peak, existing premises may remain sufficient for most manufacturers to accommodate the more modest rise in demand.