Image: Dreamstime/Alberto Barco Figari
The Construction Products Association (CPA) has downgraded its autumn forecasts for construction output growth in 2020 and 2021 by half a percentage point each, blaming continued uncertainty around Brexit and major infrastructure projects.
The CPA predicted growth of 1% in 2020 and 1.4% in 2021 when it produced its summer forecast but has now lopped half a percent off each of those figures to 0.5% and 0.9% respectively.
It said the move reflected delays and cost overruns with Hinkley Point C and the ongoing independent Oakervee review into HS2, as well as a lack of certainty over how Brexit negotiations will conclude.
The CPA also pointed to falling starts in the private housing sector, predicted to drop 2% this year given slowing house price growth and weaker demand in the southern regions of the country, before returning to growth in 2020.
The public housing sector’s prospects are more positive due to grant funding on the Shared Ownership and Affordable Homes Programme, although the CPA warned there were “signs of vulnerability” as housing association development is increasingly linked to the slowdown in the general housing market.
It also identified “pockets” of infrastructure growth in infrastructure, particularly in the offshore wind sector. Large offshore wind farm projects underway or starting are soon to reach over £1bn in value.
The warehouses sub-sector is also forecast to increase by 15% in 2019 and 20% in 2020. Owing to the development of automated warehouses by online retailers which use higher-tech operations in logistics, the scale and value of projects have increased.
CPA economics director, Noble Francis, said: “Construction activity is expected to grow by only 0.5% during 2020, even assuming a smooth Brexit involving a deal or, more likely, another extension to Article 50. The uncertainty created over when and how the UK will leave the EU has affected new investment in parts of private housing and commercial, the two largest construction sectors. Add to this growing concerns about the government’s major project delivery and the next two years are expected to be challenging in spite of a raft of infrastructure projects in the pipeline and a strong latent demand for housing.
“Private housing starts are expected to fall by 2% this year before rising by 1% as falls in house building in London, the South East and East are expected to be offset by growth in the North West, Yorkshire and the Midlands. Commercial sector output is forecast to fall by 6.9% this year and a further 4.7% in 2020 as a lack of upfront investment in offices towers for a long-term rate of return is exacerbated by a continued decline in retail construction as spending shifts online. It’s certainly not all bad news, however, as infrastructure is forecast to rise by 11.2% this year and 3.7% in 2020 in spite of poor delivery of major projects. If government were able to improve its delivery of major infrastructure then this could drive strong increases in construction activity as well as boosting UK economic growth and productivity.”
