Slowdown in construction growth predicted by CPA

The Construction Products Association (CPA) has revised downward its forecast on construction output growth due to the growing anxieties surrounding the sector.

The CPA has now predicted in its Spring 2016 Forecast that construction output is to rise 3.0% in 2016 and 3.6% in 2017.

However, these figures still mark a downward revision from the 3.6% growth in 2016 originally forecast in the CPA’s Winter Forecast. The CPA has highlighted three significant factors behind the downward revision; the effects of slowdown in global economic growth prospects; the uncertainty surrounding Britain’s future in the EU, and how growth in the construction industry will be affected by the skills shortage.

Forecasts for the construction industry until 2019 are still expected to rise, with activity in the key sectors of infrastructure, commercial and private housing are expected to lead to growth of 15.4%.

The report highlights the unrelenting demand for new housing as a continued source of growth for the industry, with house price rises expected to rise this year and next, especially in areas of high demand such as London and the South East. Growth in private housing starts are expected to rise 5% in both 2016 and 2017.

Given the government’s commitment to the construction of large infrastructure projects across the country, it comes as no surprise that the CPA has predicted infrastructure to be the main driver of growth within the construction industry. Infrastructure work is anticipated to rise 56.3% by 2019.

Retail construction is predicted to fall 1% and only see a 2% increase in 2017. The CPA cites “consolidation” from major supermarket companies and the continued move away from the high street towards online retailing as underlying factors for this.

This shift will, however, boost the construction of industrial warehouses construction which is forecast to increase 23.7% by 2019.

New office construction is expected to increase 7% in 2016 and fall to 6% in 2017, with high profile projects planned in London, Manchester and Birmingham.

Professor Noble Francis, Economics Director, said:  “The latest forecasts for construction are still positive.  With growth of 3% in 2016 and 3.6% in 2017, activity in the construction industry is expected to outpace growth in the wider UK economy.  The risks to this growth, however, continue to rise.  UK economic growth forecasts continue to be downgraded in light of poorer global economic growth prospects.  In addition, the months leading up to the EU referendum in June will inevitably see a drop off in investment as increased uncertainty leads nervous investors to adopt a ‘wait and see’ policy until the referendum is out of the way, which could have a significant impact on UK economic growth and the construction sector in particular.

“The most pressing issue is whether the wider construction industry actually has the skills available to deal with double-digit growth in the infrastructure, commercial and private sectors at the same time.  By 2019, total construction output is expected to be £20Bn higher than in 2015, yet employment in the industry remains 324,000 lower than it was over seven years ago.  If the growth we have forecast is to be achieved then the serious issue of skills shortages needs to be addressed.”

 

 

 

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