Continued signs of construction growth

CPA says forecast horizon remains positive but risks that threaten construction have intensified

THE Construction Products Association’s latest forecast estimates growth for the construction industry of 3.6% in 2016, which is a downward revision from its Autumn 2015 forecast of 3.8%, primarily because of slower UK economic growth.

However, the CPA says the forecast horizon remains positive, largely due to the inclusion of HS2 main works for the first time, although the risks that threaten construction activity have intensified, particularly weakening global economic growth, uncertainty over the EU referendum, and skills shortages.

Highlights of the latest forecast include:

• Total construction output to rise 3.6% in 2016 and 4.1% in 2017
• Private housing starts to rise 5.0% in both 2016 and 2017
• Industrial activity expected to increase 21.3% by 2019
• Office construction to increase 7.0% in 2016 and 2017
• Infrastructure work to rise 56.9% by 2019.

Prof. Noble Francis, economics director at the CPA, said the key fundamentals for the sector were generally positive with private housing, commercial and infrastructure all expected to drive industry activity.

‘The infrastructure sector is set to stand out, rising 56.9% by the year 2019 owing to substantial activity in the rail, energy, roads, water and sewerage sub-sectors,’ he said.

Rail work will primarily be driven by Network Rail activity but also boosted by HS2, which the CPA has now included in its forecasts. In previous forecasts, uncertainty regarding its cost, planning and timing caused it to be excluded.

The energy sub-sector will be boosted by work on Hinkley Point C where main works are anticipated from 2018, though the CPA has said further delays cannot be ruled out.

Road construction work is also likely to increase throughout the forecast period, by 37.2%, though this is substantially less than was initially expected as Highways England struggles to enact its project pipeline to time and budget.

However, despite the continued signs of construction growth, Prof. Francis warned of significant risks to the latest forecast, including the uncertainties surrounding global economic prospects and the EU referendum, and the urgent challenge around skills shortages.