United Kingdom Infrastructure Report Q1 2008

Although it suffered a decline in GDP growth during 2001-2003 due to a global downturn, an overvalued pound and a decline in manufacturing and exports, the United Kingdom (UK) economy remains one of the strongest in Europe. Some of the strengths of the country's economic framework are its high levels of literacy, low inflation and unemployment rates, and large deposits of natural resources that include coal, natural gas and oil. The country's construction industry is a significant contributor to UK's GDP, with a share of more than 5%. The industry, dominated mainly by small and medium enterprises, comprises about 250,000 firms and provides employment to nearly 2.2mn people. BMI forecasts the industry to grow at an average rate of 3.4% during 2008-2012.

Although in recent times, the UK has witnessed a spurt in activity in the areas of hotel construction and renovation and construction of residential and office spaces, the projected growth in the country's construction industry is expected to be driven primarily by the residential and commercial construction sector. That said, infrastructural development in the island country spans across a wide variety of sectors including power plants, airports, roads and railways. Some of the major ongoing projects are the construction of a satellite at Heathrow airport's Terminal 5 (T5) complex at a cost of US$802.33mn, a US$3.004bn investment for renovation of the Network Rail network and construction of an 800 megawatt (MW) power plant at Newport.

However, a few weaknesses can still be noticed in UK's construction industry. One among these is the shortage of skilled labour. If not tackled properly, this is likely to hamper industry growth. Another area of concern is the steady increase in interest rates and mortgage availability.

These facts notwithstanding, BMI forecasts the industry to reach a value in excess of US$160bn in 2008 and further cross US$192bn by 2012. The industry's contribution to the GDP - currently more than 5% - is expected to reach 6% in 2012.