CPA predicts construction business will pick up after a jinxed start to 2018
The latest economic forecast from the Construction Products Association (CPA) predicts that output is going to be pretty flat for the rest of this year – although it does predict things will get a little better next year.
The industry is unanimous that the collapse early this year of Carillion – and the many companies damaged by it because of unpaid bills – as well as the freezing temperatures of ‘the Beast from the East’ hurt overall output, keeping it flat. But it says this should increase to 2.7 per cent next year, falling back a little to 1.9 per cent in 2020. Such growth as there is comes from infrastructure and private housing construction, says the CPa.
Infrastructure output is forecast to grow 6.4 per cent this year and 13.1 per cent in 2019 as main civil engineering work commences on large projects such as Hs2, the Thames Tideway Tunnel and Hinkley Point C.
Private housing output is forecast to rise by 5 per cent, buoyed by the government’s Help To Buy scheme for new builds. A sharp decline was recorded in the commercial sector, directly attributable to the 2016 Brexit vote as companies defer or cancel plans for new office space here. Construction of office buildings is expected to fall by a fifth, or 20 per cent, this year and by 10 per cent next year.
The Carillion’s collapse was a direct hit on several commercial PFI health projects including the Midland Metropolitan Hospital and the royal Liverpool Hospital. That entire PFI health sector is expected to see output shrink by 5 per cent this year.
The Construction Products association’s economics director Noble Francis said: “The start of the year was a bad one for construction. Carillion, the UK’s second biggest contractor, went into liquidation in January and led to an hiatus on infrastructure and commercial projects. The snowy weather badly affected work on site for at least three working days in February and March and, as a result, 2018 Q1 construction is likely to be £1.5bn lower than in 2017 Q4. Fortunes for the industry overall will depend on the extent to which construction activity catches up during the rest of the year.
“Construction activity is forecast to be flat this year and rise by 2.7% next year, primarily driven by infrastructure and private house building. Half of the activity lost in Q1 is expected to be regained during 2018. work on some Carillion projects has already restarted, on joint-ventures or where major clients such as Network rail have been keen to continue work.
“Other projects will take time to re-tender but are still likely to restart this year. Large infrastructure projects should also allow for a catch-up after the adverse weather and often have penalty clauses for delays. despite the sector’s strong growth prospects, questions remain about poor government delivery of major infrastructure projects.
“Private housing starts are expected to rise 2 per cent in both 2018 and 2019 in spite of the slowdown in the general housing market as Help to Buy is clearly sustaining demand for new build homes. outside London, house building will rise quicker than this but growth overall will be constrained by the ongoing fall in demand for high-end residential in the capital.
“The growth in infrastructure and private house building this year is forecast to offset falls in the hard hit commercial sector, where Brexit uncertainty continues to hit international investment in new office towers in London and high street woes affects the construction of new retail.”
CPA construction business predictions at a glance:
- Construction output to remain flat in 2018 (0.1 per cent) and rise 2.7 per cent in 2019
- Private housing starts to rise 2 per cent in 2018 and 2019
- Office construction to decline 20 per cent in 2018 and 10.0 per cent in 2019
- Retail construction to fall 10.0 per cent in 2018 but rise 5.0 per cent in 2019
Infrastructure work to rise by 6.4 per cent in 2018 and 13.1 per cent in 2019
You may also be interested in: