Introduction and background© Centre for Economics and Business Research Ltd, 20113. This study has been commissioned by the UKContractors Group ('UKCG') and was conducted byCebr during September and October 2011.Study objectives. The objective of the study is to demonstrate theeconomic impacts and importance of theconstruction industry to each of the smaller UKnational economies (Wales, Scotland and NorthernIreland) and to each of the nine Government Officeregions of England. . It was to do this by providing comprehensiveeconomic data for each of these separateeconomies, including:??the proportion of regional GDP that isrepresented by construction??the numbers of SMEs being supported byconstruction supply chains??the amount of local employment generated byconstruction activity??the number of construction apprentices andundergraduates undergoing training??the pipeline of construction activity over the nextfew years (based on data and analysis providedby Glenigan, trusted provider of constructionindustry data and intelligence)Methodology. Cebr was asked to build on, rather than supplant thework already carried out by LEK Consulting at thetotal UK level. This revealed a headline impact of£2.84 of output in the wider economy for every £1 ofconstruction output.. However, without the data underlying the LEKestimates, Cebr had to make our own estimates ofthe UK multipliers. The only significant differenceoccurred between the alternative estimates of theinduced impacts of construction activities and theresulting Type II multipliers. . This difference arises from the point in theeconomic cycle to which the estimates relate. Cebrused 2008 data, a year during which, for the mostpart, the economy was operating at full capacity.LEK used 2009 data, when the recession was infull-swing and significant spare capacity hadbecome a pervasive feature.

Introduction and background© Centre for Economics 4and Business Research Ltd, 2011. Cebr suspect, therefore, that LEK's estimateprovides a better reflection of the economicsituation today. To the extent that this is the case,the national- and regional-level estimates of thetotal GVA and employment impacts presented inthis report can be considered under-estimates.. Cebr used so-called 'location quotients', inconjunction with the UK vector of technicalcoefficients to produce individual constructionmultipliers for each of the English regions, Wales,Scotland and Northern Ireland. The UK construction industry since the recession. The construction industry has shrunk significantlysince the 2008 financial crisis and subsequentrecession. UK-wide construction output declined inreal terms by 2.8% in 2008 and by 13.3% in 2009.. While our analysis suggest a circa 8% real termsexpansion in UK construction output in 2010, this ismodest in absolute terms (due to the lower base).Furthermore, our forecasted rate provides notnearly enough growth to get the industry back topre-recession levels.. Total workforce jobs in the construction industrydeclined by 6.8% during the year ending December2009, by a further 2.4% in the year to December2010 and, again, by 1.7% during the first half of2011 (based on seasonally adjusted data). (Part-time jobs are included in this measure of employment.). Meanwhile, the Coalition Government's top priority is cutting the deficit and the impact of thespending cuts are beginning to be felt throughoutthe UK economy, not least a construction sector that derives 40% of its output from public sector contracts.. This is exacerbating significant difficulties alreadybeing experienced by the construction industryfollowing the sharp declines in private sectorconstruction activity in the wake of the financialcrisis and economic recession. . The industry has had varying fortunes in thedifferent UK nations and English regions. Forinstance, regions like the North East haveexperienced dramatic falls in output, while others like London and the South East have fared much better.