The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

BMIs view that UK construction industry growth would slow significantly in 2011 has fully played out and we maintain this subdued growth outlook for the sector in 2012. The latest data from the Office for National Statistics (ONS) lends further support to this view, indicating that output in Q311 fell for the second consecutive quarter, contracting by 3.6% compared to the same period in 2010. We are therefore maintaining our muted growth outlook between 2012 and 2016, with real growth expected to average 1.4% year-on-year (y-o-y). For 2012, we expect conditions to remain largely prohibitive to sector growth, as austerity cuts, a weak housing market and a challenging project financing environment continue to weigh on the industry.

Recent Developments include:

- In November 2011, the government announced a GBP500mn fund to boost the UKs depressed construction industry, in a bid to inject life and liquidity into the sector. The Growing Places fund is the latest in a string of stimulus measures to be introduced by the state, as it seeks to boost a sector viewed as crucial to the UKs economic growth prospects. Moreover, the funds apparent focus on local businesses and communities should provide a welcome source of funding to small- and medium-sized firms (SMEs), which have been hit by a shrinking, increasingly competitive domestic market and rising project financing costs.

- Under the banner of the National Infrastructure Plan (launched in December 2010), in November 2011, the government announced its intention to tap into institutional investor demand for access to infrastructure. The governments plan pertains to GBP5bn in public funds to attract a further GBP20bn from pension funds over the next five years. To this end, the Treasury signed a memorandum of understanding with the National Association of Pension Funds and the UKs Pension Protection Fund.

- In November 2011, the UK Treasury announced that the private finance initiative (PFI) model in its current form is no longer viable. The rising cost of financing in recent years has made the argument for an investigation into the countrys default approach to project procurement increasingly hard to ignore. With no indication as to what form this new model will take, the Treasury - presiding over a sluggish economy and banking sector increasingly that is averse to long-term lending - needs to strike the right balance between incentivising private sector participation and taxpayer value-for-money.

- The UKs first commercial-scale coal carbon capture and storage (CCS) power plant is now expected to be completed by 2016, after an idle project secured financial backing in May 2011. Following delays to projects due to the prohibitive cost – combined with a lull in demand for electricity over recent years – hopes that CCS will play a critical role in the decarbonisation of the UKs electricity mix have now been rekindled. Once completed, the project could set a ground-breaking precedent for the UKs electricity sector.