Overall industry output will drop 7% until 2011 while private housing starts plummet 40%

The construction industry is facing three years of recession warns the Construction Products Association after the financial crisis forced it to revise its forecasts.

The CPA is now predicting that the industry’s output will decline 7% over the next three years, with 2011 the earliest it can expect a return to growth.

The picture has darkened compared with three months ago, when the CPA predicted that output would drop 3% over two years.

The housing sector will remain the hardest hit as the banking crisis will continue to choke mortgage lending.

The outlook will depend on whether the US government’s proposed $700bn bail-out of its banking system is works.

The CPA foresees private housing starts remaining at record lows until at least 2012.

Private housing starts have fallen 40% since last year, and the CPA is predicting a 24.1% fall in output this year, followed by a 10.4% drop in 2009. Although the market is expected to pick up in 2010, it is not expected to return to 2007 levels until 2013.

The repair and maintenance, commercial and industrial sectors are all expected to decline, with education, health and the London Olympics compensating slightly.

Michael Ankers, chief executive of the CPA, said: “These forecasts are the gloomiest we have produced since compiling this information.”