CPA revises Autumn forecast

Uncertainty surrounding the UK post-Brexit and around major infrastructure projects has led the Construction Products Association’s (CPA) to downgrade its Autumn Forecasts for construction output growth.

The CPA has revised figures for 2020 and 2021 from 1.0% and 1.4% to 0.5% and 0.9% respectively in its latest construction forecasts. The downgrade reflects uncertainty around Brexit and major infrastructure delivery, such as at Hinkley Point C with delays and cost overruns, and the Oakervee Review into HS2 due shortly. Added to this is the slowing house price growth and many investors holding off commitments due to Brexit uncertainty, leading the CPA to a more pessimistic projection.

Another shining light for the sector, private housing, has also seen falls in output, with the CPA anticipating a 2.0% drop this year due to slowing house price growth and weaker demand in southern regions of the country.

Despite the concerns around major projects, infrastructure still shows growth in other areas, with offshore wind projects receiving significant investment in activity. More than £1Bn of large offshore wind farm projects are underway or starting soon.

Warehousing is also likely to be an area of growth, with the sub-sector forecast to increase by 15% in 2019 and 20% in 2020. As more retail moves from the high street to online stores, storage and delivery outposts are needed and as automated warehouses use higher-tech operations in logistics, the scale and value of projects have increased.

Commenting on the Autumn Forecasts, CPA’s Economics Director, Noble Francis, said: “Construction activity is expected to grow by only 0.5% during 2020, even assuming a smooth Brexit involving a deal or, more likely, another extension to Article 50. The uncertainty created over when and how the UK will leave the EU has affected new investment in parts of private housing and commercial, the two largest construction sectors. Add to this growing concerns about the government’s major project delivery and the next two years are expected to be challenging in spite of a raft of infrastructure projects in the pipeline and a strong latent demand for housing.

“Private housing starts are expected to fall by 2.0% this year before rising by 1.0% as falls in house building in London, the South East and East are expected to be offset by growth in the North West, Yorkshire and the Midlands. Commercial sector output is forecast to fall by 6.9% this year and a further 4.7% in 2020 as a lack of upfront investment in offices towers for a long-term rate of return is exacerbated by a continued decline in retail construction as spending shifts online. It’s certainly not all bad news, however, as infrastructure is forecast to rise by 11.2% this year and 3.7% in 2020 in spite of poor delivery of major projects. If government were able to improve its delivery of major infrastructure then this could drive strong increases in construction activity as well as boosting UK economic growth and productivity.”

If you would like to read more articles like this then please click here.

The post CPA revises Autumn forecast appeared first on UK Construction Online.