Construction growth forecasts downgraded as risks grow

Aaron Morby 9 years ago
Share

Forecasters have lowered construction growth predictions for this year from 3.6% to 3% as fears mount about growing headwind for the industry.

The Construction Products Association has cut its forecast for the third time in nine months amid concern of a deepening global slowdown, the impact of the EU referendum on investors and skills shortages.

Even with these taken into account construction can look forward to around 3%-plus annual growth over the next few years, with infrastructure work expected to soar 57% by 2019, if Government can keep its spending plans on track.

CPA spring forecast highlights

  • Construction output is forecast to rise 3.0% in 2016 and 3.6% in 2017
  • Private housing starts expected to rise 5.0% in both 2016 and 2017
  • New offices activity anticipated to increase 7.0% in 2016 and 6.0% in 2017
  • Retail construction expected to fall 1.0% in 2016 and only rise 2.0% in 2017
  • Warehouses activity forecast to increase 23.7% by 2019
  • Infrastructure work is anticipated to rise 56.3% by 2019

Professor Noble Francis, economics director, said:  “The latest forecasts for construction are still positive.

“With growth of 3.0% 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. ”

Despite substantial risks, the CPA anticipates growth in the three largest construction sectors; private housing, commercial and infrastructure.

It said: “Private housing starts are forecast to rise 5% in 2016 and 2017, with major house builders keen to take advantage of high demand for home ownership and government policies that attempt to deal with issues around affordability. 

“After a spike in property transactions in Q1 owing to April’s increase in stamp duty for buy-to-lets and second homes, however, don’t be surprised to see a fall in property transactions in Q2.  That shouldn’t affect the general housing market medium-term, as the return on investment in property remains considerable.”

Work in the commercial offices sector is forecast to grow by 7% this year and a further 6% in 2017 due to major developments in the pipeline, not just in London but also Birmingham and Manchester.

But retail construction is expected to fall 1% this year and only rise 2% next year as major supermarket chains consolidate, focusing more on small convenience stores where sales margins are higher. 

The shift away from high street shopping to the internet will continue to drive industrial warehouses construction, expected to increase 10% this year and a further 5% in 2017.

Francis said: “Infrastructure work is forecast to rise 56.3% by 2019 due to growth in rail, energy, roads, water and sewerage; however, there are key issues in the medium-term. 

“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.”

Latest news

Cardo in talks to buy Breyer roofing arm

More than 100 jobs could be saved at Breyer Roofing
50 minutes ago

Quartet win £750m Wales & Western railway deal

Network Rail confirms partners for Reactive and Minor Works framework
22 minutes ago

Plan in for £350m London Bridge life sciences hub

Snowsfields Quarter will consist of three buildings containing labs
1 hour ago

Surging labour costs push tender price forecast up

Pick-up in tender prices despite weak growth
1 hour ago

Permasteelisa wins cladding deal on Multiplex city tower

Facade specialist wins work on Fenchurch Street ‘hanging gardens’ tower
31 minutes ago

Wates wins fit-out for Manchester First Street Hub

Smartspace arm secures another Government hub deal
22 hours ago

Peel Ports reveals winners for £750m framework

18 firms win places on deal: Full list
22 hours ago

Big trade names dropped in M Group rebrand

Acquisitive group formed from Morrison Utility services in 2016
20 hours ago

Breyer Group files administration notice

Staff hope rival firm could buy assets and save jobs
1 day ago

Former Severfield director takes helm at Embrace Steel

New CEO Martin Kelly aims to step up expansion of steelwork contractor
1 day ago

£302m upgrade funding awarded to FE colleges – list

Cash shared out between England’s 179 college groups
1 day ago

FK Facades thrives but construction arm hit by ISG row

Dispute with failed contractor costs specialist £5.5m
1 day ago

Galliford Try gets go-ahead for Milton Keynes PRS tower

33-storey tower needs gateway 2 approval before work can start
2 days ago

Small house builders get £150m funding for green homes

Developers will have to meet-up to ten new criteria to benefit from interest rate discounts
1 day ago

Lendlease Construction renamed Bovis

US private equity firm completes £35m purchase of UK contracting business and rebrands
2 days ago

Breyer Group battles for survival as rivals circle

Housing maintenance firm fights three winding up petitions in a month
2 days ago

Careys facing £2.4m claim by developer over demolition cartel

Giant Hong Kong developer claims it was overcharged on Lots Road Power Station job
2 days ago

Multiplex profit drops a third as revenue rises to £780m

Spate of new orders sets contractor up for three years of work
2 days ago

Galliford Try and Breheny land latest Sizewell C road deals

More infrastructure deals for new nuclear power station
3 days ago

Worker trapped in collapsed septic tank pit

Contractor and director fined after worker suffers multiple fractures
2 days ago

Homes England buys stalled Broad Marsh site

Demolition to finally be completed as developer hunt begins
3 days ago

Vistry go-ahead for 353 homes at Rochester Riverside

Work to start on next phase of Kent town regeneration at end of this year
3 days ago

M&E firm J S Wright collapsed owing £19m

Trade creditors hit for £11.4m by employee-owned Midlands firm
3 days ago

Right to work checks to be extended to self-employed

Government plans crackdown on illegal working and rogue employers
3 days ago

Midlands developer turns to London with £1bn resi schemes trio

SevenCapital plans 1,000 flats in Kensington, Islington and the Isle of Dogs projects
3 days ago

Deck falls off huge scissor lift at Winvic site

Two men seriously injured as platform plunges to the ground
6 days ago

Weston targets Build to Rent with new division

Weston Partnerships signs first deals with asset managers and councils
3 days ago

Bouygues seals deal for £119m Cardiff college campus

Construction to start in June on two new buildings
6 days ago

£140m cash injection to speed-up flood defence schemes

Funding part of £2.65bn investment over the next two years
3 days ago

Bid race starts for £15bn schools framework refresh

DfE throws framework open to more contractors
6 days ago

Contractor services