CPA: Brexit uncertainty means “mixed picture” for construction industry

Uncertainty following the Brexit vote reveals a “mixed picture” for the construction industry over the next two years according to the Construction Products Association (CPA).

The CPA’s Autumn Forecast 2016 predicts that construction output will rise 0.6% in 2016, a slight upward revision from the 0.4% anticipated in the summer.

This will fall to 0.3% in 2017 and then 0.2% in 2018. This would mean that construction activity would remain largely flat over this period.

However, upon closer inspection of individual sectors reveals that growth in infrastructure and education offsets drops in activity in sectors such as commercial offices and industrial factories.

The findings also suggest that privately funded projects could be more at risk of being affected by the uncertainty than those that are publicly funded.

The CPA predicts that infrastructure work will be the key driver of activity within the industry and will increase by 6.2% in 2017 and 10.2% in 2018.

Construction activity in education and health is expected to expand between 2016 and 2018. Growth of 2.3% is anticipated in 2016 before a 1.4% rise in 2017 and growth of 2.0% in 2018.

The health sector will see an increase of 1.4% in 2016, 1.3% in 2017 and 1.6% in 2018.

According to the forecast, private house building may face a struggle, especially given the ambitious housing programme the government has set. Private housing starts to rise 2.0% but remain flat in 2017 and fall 2.0% in 2018.

The report says that a strong underlying demand for housing that has meant house prices and purchases have remained largely unaffected since the EU referendum.

Factories construction is expected to drop 5.0% in 2016 and then by 2.0% the following year.

The CPA forecast that office construction would initially rise by 8.0% this year, before falling by 3.0% in 2017 and then by 10.0% in 2018.

Retail construction would be hit by falling output with this year experiencing a decrease of 8.0%, with further falls of 4.0% next year and 2.0% in 2018.

Noble Francis, Economics Director, said:  “Surveys across the industry highlight that activity in the construction sector has been sustained post-referendum, primarily based upon work on projects that were signed in the 12-18 months before the referendum.

“Looking forward, projects in the pipeline mean that construction activity is likely to continue throughout the rest of 2016 and the first half of 2017.

“From the second half of 2017, however, there is likely to be a clear division between the fortunes of privately-funded construction sectors – such as commercial offices and industrial factories – where the current uncertainty is likely to have a major impact, and those that are largely unaffected by post-referendum uncertainty – such as infrastructure and education – which are either publicly-funded or in regulated sectors.

“With an upcoming Autumn Statement, it is vital that the Chancellor focuses on reducing uncertainty for the private sector, sustaining the housing sector and ensuring delivery of education construction and major infrastructure projects already in the pipeline.”

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