Experian publishes chastening set of forecasts - before it’s even estimated likely impact of Brexit
The future growth prospects for construction have been radically downgraded by Experian, in a set of forecasts formulated even before the Leave result of the EU referendum was known.
Construction’s growth forecast for 2016 has been slashed to 0.3%, down from a 2% growth forecast for the year just three months ago.
Construction’s growth forecast for next year has also been downgraded, to 1.7%, down from Experian’s April forecast of 2.9%. Experian forecasts growth will be maintained at 1.7% in 2018.
But Experian warned this set of Summer forecasts were set before the UK had voted for Brexit, working on the incorrect assumption Remain would win. Thus the full and likely negative impact of the referendum result will not be factored into its forecasts until its next set are published in the Autumn.
Explaining the downgrades, Experian said a global economic slowdown over the past few months had impacted prospects for the economy and construction “even without the impact of the referendum vote”.
Commenting on the likely impact of Brexit on construction’s prospects, Experian said “this is currently unquantifiable, but is almost certain to be negative”.
Potential vulnerabilities highlighted post-EU referendum included tightening credit, a potential drop in domestic demand, a drop in house prices, cuts to public capital spending and a drop in foreign direct investment (see boxes below).
Reacting to the Experian figures, Michael Dall, economist at Barbour ABI, said: “There is no doubt that construction growth was already slowing pre-referendum, with many firms adopting a “wait and see” approach to future activity.
“Had the vote been Remain I would have expected a stronger second half of the year so growth overall would be better for 2016. However, that is academic now and the downside risks facing the industry while Brexit is negotiated are clear.”
The latest set of downgrades is the latest of a string of Experian downward revisions. In Experian’s Winter forecast, published in January, Experian had said the sector would grow 2.6% this year, and 3.9% next year. Meanwhile in last October’s forecasts the finance house said the sector would enjoy 3.6% growth in 2016 and 4.3% growth the next.