Most construction firms will find it difficult to escape the impact of subdued economic growth, rising inflation and falling real wages on the industry over the next two years, the Construction Products Association (CPA) said in its latest forecast.
In addition, it said, negotiating unprecedented uncertainties as the UK leaves the EU is expected to result in little growth, with output expected to rise 0.7 per cent in 2017 and remain flat in 2018.
The latest forecasts from the CPA come at a time where any growth at all will be reliant on government’s delivery of infrastructure projects.
If not realised it would lead to an industry-wide decline of over 1.0 per cent in 2018, said the CPA.
House building will continue to be a primary driver of growth, with private housing starts rising by 5.0 per cent in 2017 and 2.0 per cent in 2018.
In the second quarter of this year the government’s Help to Buy equity loan accounted for 40 per cent of new homes and has been a significant policy for supporting building activity.
The additional £10 billion the government announced for the scheme in October will continue to sustain house building despite the slowdown in the general housing market, said the CPA.
The sharpest decline will be in the commercial sector, it said, and will be particularly felt in the offices sub-sector as EU Referendum-induced wariness among investors has led to a sharp fall in contract awards.
Office construction is expected to decline 5.0 per cent this year, worsening to a 15.0 per cent decline in 2018, and is likely to accelerate if it proves to be the case that the UK will not be part of the Single Market and financial services firms choose to transfer operations out the UK into other EU member states.
Economics Director at the Construction Products Association Noble Francis, said: “Construction activity is currently high, particularly in cities outside the capital such as Birmingham and Manchester.
“However, the forecasts highlight that the fall in construction new orders since the second half of 2016 is now starting to feed through to activity on the ground as projects signed up to pre-referendum end and are not being replaced.”