UK construction forecast to see two further years of decline

UK construction forecast to see two further years of decline
Published: 11 July 2011

Construction activity in the UK is expected to continue to decline for at least the next two years, followed by only weak growth in 2013, before any significant recovery is likely to return in 2014 according to the latest Construction Industry Forecasts, published by the Construction Products Association.

Commenting on the figures, Noble Francis, Economics Director of the Construction Products Association said: “The industry is quite volatile at the moment, with some sectors enjoying increased activity, albeit from a very low base. However, despite some positive signs, the overall prospects for the next few years are very poor. Output for this year is expected to fall 0.5 per cent, followed by a greater fall of 2.8 per cent in 2012. In 2013 output will be broadly flat with just 0.2 per cent growth, before a return to some significant growth of 3.4 per cent in 2014.

“On a positive note private housing is expected to grow 62% over the forecast period. However, until 2013, we will still be building less than half homes needed to meet the number of new households created each year. These levels of house building will exacerbate the existing difference between supply and demand, leading to an additional housing gap of more than 600,000 homes in just five years.

‘The government has identified construction as a key driver to help boost economic recovery and for private sector work to replace public sector. Unfortunately, although the public work is now beginning to decline and will fall by 24 per cent by 2014, there is little evidence that the private sector work will replace this over the next couple of years.

“It is vital that government fully grasps the implications of these forecasts. If it wants private construction activity to play a significant part in the recovery, then it must do more to help stimulate the industry, such as accelerating changes to the planning system, improving bank lending, reducing regulatory burdens and increasing the likely success of the Green Deal proposal, for instance by reducing VAT on Green Deal activity in line with the VAT charged on energy consumption. It would also help if the government actually spent on construction what it proposes.’

Other key findings in the forecasts include:
- private housing starts to rise 4% in 2011 and, despite growth each year, in private housing starts in 2015 will still be 14% lower than 2007’s pre-recession levels
- public housing starts are expected to fall 39% in the next three years
- retail construction to rise 4% in 2011 due to supermarket expansion despite other areas of retail construction being subdued
- offices construction to rise over 50% in the next five years driven by growth of high profile office space in London
- Roads construction set to halve by 2014
- Energy construction set to rise threefold by 2015
-  Private housing repair, maintenance and improvement output to be flat in 2012 as consumers defer spending until the government’s Green Deal takes effect.