CPA Predicts Another Bleak Year For Construction Industry

After an estimated fall of more than 12% in construction output in 2009 – the largest fall in a single year since records began in 1955 – the latest construction forecasts from the Construction Products Association predict a further decline of 3% in output this year, with the first tentative signs of recovery not expected until 2011. However when it does come, the recovery will be very slow with annual growth of less than 1% in each of the three years from 2011-2013. Commenting on these latest forecasts, Construction Products Association Chief Executive Michael Ankers said; ‘Construction has been one of the sectors of the economy worst hit by the economic downturn, and whilst it is widely believed that the wider economy is now out of recession, the construction industry is going to have to wait for at least another 12 months. ‘Output on office, retail, and other commercial projects has been particularly badly hit. and last year’s fall of over 26% is expected to be followed by a further fall of 15% this year. At the same time, output on industrial projects, which has already fallen over 50% from its 2007 peak, is expected to fall still further during the next 12 months. ‘On the positive side, new private house building which fell to levels not experienced since the 1920s has started to recover with starts this year expected to be 15% higher than in 2009, and with similar levels of growth in each of the next three years. ‘The major concern for the industry is public investment in construction where work on the major hospital and schools programmes has helped save the industry from even more dramatic falls in output. Looking ahead, however, the recent Pre-budget Report confirmed that there would be sharp cuts in government capital spending over the next three years, and if these occur before there is any significant recovery in private sector construction,  then there is a real danger that what we currently anticipate as being a three year downturn will extend even further.’ In conclusion, Ankers said; ‘The construction industry is a major part of the economy and it is hard to see how there can be any significant recovery whilst construction is still in recession. In addition, what the industry provides in terms of roads, rail, and energy infrastructure, as well as modern, efficient, and low carbon buildings, is key to a sustained recovery in our manufacturing and service sectors. In the run up to the General Election, it is critical that the major political parties recognise these points and ensure they are reflected in the policy proposals they put before the electorate.’ Other key points in the Construction Products Association forecasts are; – Even with the levels of growth for private new housebuilding in these forecasts the number of starts in 2013 will still only be 75% of the number achieved in 2007, and only just over half the number that the Barker Review recommended was needed to meet housing demand – There will be a further fall in private housing repair and maintenance in 2010 before the sector recovers quite strongly in the following three years as the wider economy strengthens and unemployment starts to fall – The one area where the forecasts see consistent growth throughout the forecast period is on infrastructure, driven initially by significant investment in rail and road projects, and towards the end of the period by Crossrail and the start of the nuclear programme – With trend growth in construction output in every year after 2013, it would take until 2021 to reach the level of output that the industry enjoyed in 2007  Read Richard Lambert’s blogpost on the CPA’s Industry Forecasts