The construction industry is missing out on over £100bn per year, but why?

The scale of the construction industry’s productivity gap has been laid bare in the latest research report from Mace, revealing that the UK is missing out on more than £100bn of annual economic activity.

Mace’s research report, ‘The Size of the Prize’, has been published today (January 25) and compares both the construction sector and the manufacturing sector in the UK.

Manufacturing has seen ‘steady growth’ in the past two decades, allowing the sector to deliver more economic growth with the same or fewer number of workers.

But the UK construction sector has seen productivity barely progress for the past 20 years, limiting growth and denying the UK more than £100bn a year of economic benefit.

Mark Reynolds, Mace’s chief executive, said: “The collapse of Carillion makes clear the stark challenges facing the construction sector.

“Improved productivity is the key to more sustainable growth and stability across the industry. Unless we take swift action, slim margins and below average productivity will prevent the UK’s construction sector reaching its potential.”

Mace’s figures show that - had construction kept pace with the productivity gains in manufacturing - the UK would be seeing:

• An approximate three per cent increase in the UK’s overall Gross Domestic Product (GDP)
• An approximate three per cent increase in the UK’s overall Gross Domestic Product (GDP)
• Each construction worker producing £38 an hour of economic activity, compared to £25.50
• The capacity to deliver the £600bn national infrastructure pipeline in four years, rather than six

The tax generated by an additional £100bn of annual economic activity would produce an extra £40bn a year for the government - said to be enough to eliminate next year’s budget deficit, based on the Spring Budget forecast from 2017.

The report comes shortly after the government published the Construction Sector Deal, including more than £170m of funding for the Transforming Construction programme, an initiative to improve productivity in the sector through research and development.

Reynolds added: “It’s clear the UK is missing out on a huge amount of potential growth and infrastructure delivery every year - as well as the increased funding for public services that would generate.

“Now that we have seen the scale of the missed opportunity, it’s more important than ever that we work together to improve productivity across the sector.

“This means making the best use of the research and development funding available from government, as well as investing effectively to ensure we have the required skills across our workforce.”