CPA’s latest forecast anticipates growth of 3.4% this year and 5.2% next year, with private housing, infrastructure and commercial work the main drivers
The construction industry is set to grow by 3.4% this year and 5.2% next year the latest forecast from the Construction Products Association (CPA) has found.
The CPA forecast anticipates that growth in private house building, infrastructure work and commercial activity are set to drive recovery in the industry over the next four years.
The CPA forecasts growth of 3.4% in 2014 and by a further 5.2% in 2015, well up on the 2.7% and 4.6% forecast just three months ago.
The CPA projects growth to continue throughout the forecast period to 2017, with increases of 4.4% in 2016 and 3.8% in 2017.
This comes after a 7.5% fall in construction output in 2012 and what the CPA estimates to be a 1% rise in 2013.
However, the CPA warns that despite the positive outlook over the next four years “considerable uncertainties remain regarding the long-term sustainability of the recovery in the industry and wider economy in the latter years of this forecast post-2015”.
Other key points from the forecast include:
- Infrastructure sector expected to grow 6.8% in 2014; 9.5% in 2015; 11% in 2016; and 7.6% in 2017
- Commercial sector forecast to grow 2.4% this year; 6% in 2015; 4.5% in 2016; and 4.7% in 2017
- Retail subsector output growth of 2% is forecast in 2014, with 5% rises expected in 2016 and 2017
- Private housing output expected to grow 10% in 2014 and 2015, before dipping to 5% in 2016 and 2% in 2017 as government measures such as Help to Buy cease
- Public housing starts to rise 2% in 2014 and 2015 before marginal growth thereafter, with government focusing on affordable, not social, housing provision
- Private housing repair, maintenance and improvement is expected to grow 3.5% in 2014 and then 4% per year until 2017
- Public non-housing, which includes education and health, expected to remain anaemic, with a 0.6% contraction this year, followed by 0.8% growth in 2015; 2.2% growth in 2016; and 2.7% growth in 2017
- Factories growth of 6% is forecast for 2014; thereafter 5% per year growth is projected until 2017
- Warehouses subsector output is forecast to rise 10% in 2014 and 8% in 2015.
Noble Francis, CPA economics director, said the construction industry was “in a very different place” to a year ago when output fell to a level 15.4% below its pre-recession peak.
He said: “Since 2013 Q1, activity has picked up considerably. Initially this was due to a rapid expansion in house building but more recently growth in new infrastructure and a recovery in London commercial activity have supplemented further rises in private housing.
“Private housing has seen a rapid recovery, albeit from levels of house building that are half the number needed to meet the number of households created.
“This private housing growth has been driven by wider economic recovery and government’s Help to Buy policy.
“While initial concerns were that this policy would fuel house price inflation, but clearly both house prices and house building have risen significantly.
“After 2015, without Help to Buy to support housing market demand, there are strong concerns about whether house building will continue to improve despite the clear need for new housing.
“As a consequence, [our] forecasts anticipate the growth in private housing starts slowing in 2016.”
Francis said that the infrastructure sector was a key driver of growth in the second half of 2013, with output in the sector forecast to increase 39.7% by 2017.
He said this growth was primarily driven by an expected recovery in roads construction, where output fell by over 50% in the space of two years, combined with further growth in rail construction.
He said: “In the medium-term, from 2015, infrastructure is also expected to be supported by double-digit growth in the energy sub-sector due to main works on the first of the new nuclear reactors at Hinkley Point C.
“However, the project has already been subject to considerable delays so further delays cannot be discounted, which would hinder infrastructure growth in the longer term.”
In the commercial sector, Francis said major office projects coming online in London last year had helped spark a recovery in a sector which fell 33.1% between 2008 and 2012.
He said the sector was now forecast to grow 2.7% in 2014 following growth of 2.4% in 2013. From 2015, wider economic recovery and a rise in demand for prime office and retail space outside of London and the South East should also boost the sector,” he added.
“The largest constraint to industry recovery continues to be public sector construction. Public non-housing output fell 27.2% between 2010 and 2012 and the sector is not anticipated to recover until the impacts of capital investment growth feed through in 2015.”