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This report considers the current situation of the UK construction sector, the challenges it faces over the medium-term and the implications for skills. The Importance of the Sector • Construction is a vital component of the UK economy, not only directly due to its contribution to output and employment, but also strategically in its contribution to the built environment and as part of various initiatives designed to stimulate growth. • It also has a critical functional role in meeting the low-carbon agenda either through retro-fitting buildings and ensuring that all new buildings meet energy saving standards. • The recent recession has adversely affected construction employment and performance with the sector experiencing a sharp drop in the total value of contracts. With cuts to public spending and low consumer confidence, the recession has presented the sector with a number of challenges. Construction has been one of the most affected sectors in terms of the relative decrease in employment with a decline of around 8 per cent resulting from the 2008/09 recession. • The sector rebounded faster than other sectors in the first three quarters of 2010, but there have been contractions in construction output since. While construction is often the sector which helps to pull the entire economy out of recession, it is slow in doing so in the present global downturn. • Employment in construction accounted for around 8.5 per cent of total employment in the UK in 2010 and the sector contributed more than 9 per cent of the economy’s output in the same year.