Construction firms need to base their decision-making on accurate data, but up to now information on the £25bn repair, maintenance, refurbishment and extension sector has been terribly hazy. Now a DTI-sponsored survey puts it into focus. Alan Armitage of Construction Forecasting & Research explains …
<B><font size="+1">Analysing a statistical black hole</font></b>Analysts in the construction industry, the City and the government spend many hours poring over data for new construction activity, yet a market worth as much as £25bn has been a statistical black hole. The problem is that the official statistics for repair, maintenance, refurbishment and extension (RMRE) only break down non-residential sector spending into public and private work.
More light has been shed on this sector by a large-scale research programme part-sponsored by the DTI's Partners in Innovation programme and undertaken by Construction Forecasting & Research. The research has led to the development of the first comprehensive statistical analysis of refurbishment and repair and maintenance work in the non-residential building and infrastructure sectors.
<B>Sizing the missing slice</b>
The survey revealed that the estimated expenditure on non-residential construction, both new build and RMRE, in 2000 was about £45.4bn. This is reassuringly close to the DTI's output figures for the non-housing sectors of £42.8bn. A small level of black market work, the use of in-house labour for routine repair and maintenance work (not reported to the DTI) and some grey areas as to what constitutes construction account for the difference.
The chart on the right shows the pattern of construction expenditure by type of work, as revealed by the survey. The largest single element was new construction, taking more than one-third of expenditure, followed by major refurbishment with a quarter share. Together with extensions, which account for 9% of total spending, these sectors account for 71% of total spending. That share is some 6% higher than indicated by DTI statistics but is likely to be accounted for by different bases of data collection; the survey relied on clients providing information while the official figures rely on contractors' reports. The breakdown between repairs and maintenance is roughly even, with the two subsectors accounting for 29% of total expenditure.
<B>Eliminating new build …</b>
The table to the right gives a breakdown of the relative importance of elements within the RMRE sector. This data relates to buildings rather than infrastructure.
<B><font size="+1">How the work is procured </font></b>The research divides firms into those with a turnover in excess of £10m and those whose turnover falls below this mark. The table to the right shows the pattern of expenditure in firms with a turnover of more than £10m according to how the work was procured. One of the most interesting points is the amount of work undertaken by organisations' own workforces, which accounts for more than £2.7bn, or 11% of the total. Making allowance for the £1.1bn government estimate of non-housing output by the public sector's workforce, this implies that £1.6bn of RMRE work is being undertaken by private organisations' own workforces.
<B><font size="+1">One-off projects versus planned maintenance</font></b>The survey also probed the planning processes used by clients in procuring construction work. For major works, such as refurbishment and extensions, separate approval in advance for each project was required in most cases, with a small but significant share budgeted for annually. Conversely, most routine or cyclical maintenance and repair work was procured through annual budgets. Not surprisingly, in the case of repairs, a significant proportion was undertaken as and when required.
<B><font size="+1">Manufacturing statistics </font></b>Analysis was undertaken of 15 market sectors. The chart on the right illustrates one of these: the breakdown of maintenance expenditure in the manufacturing sector (excluding food drink and tobacco). This reveals that total spending in this sector on routine maintenance is £178m out of a total of £6bn such expenditure across the economy. Most of that £178m spend (71.1%) was, as you might expect, deployed on factories and warehouses. But the survey also reveals that the market for offices, infrastructure and other buildings was worth £52m.
MethodologyThe research was based on a postal survey of construction clients, giving a customer viewpoint rather than a supply-side perspective. This method identified work undertaken by clients’ own workforces. The basis of the research was a representative sample of businesses taken from the government's interdepartmental business register, covering the main economic activities in the UK and segmenting clients into turnover brackets above and below £10m. The survey divided the economy into 15 sectors and looked at four key aspects of clients’ expenditure. Spending was categorised by type of work – from refurbishment through extensions and maintenance to repairs.Clients’ spending patterns were also analysed in terms of their procurement processes – individual project approval, annual budgeting, and so on. Sourcing is also examined, probing the extent of work by in-house workforces versus individual contracts, or facilities management. The matrix of information can be sliced in a many ways. An overview report summarising findings across the market and a set of 15 individual market sectors is available from CFR, as is a tailored database service. For more details, contact CFR on 020-7808 7070 or firstname.lastname@example.org.
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