Private recovery won’t be enough to offset public spending squeeze

The recent recovery in construction work will go into reverse next year with an output fall of 2%, according to the latest forecasts from the Construction Products Association.

The quarterly forecasts show the 4.5% estimated growth for this year will stall on the back of public spending cuts, leaving a 2% fall in output next year and a further 0.7% fall in 2012. The figures are gloomier than suggested by government figures, and predict the industry’s output will not regain its 2007 peak of £108bn within the next five years.

The falls are expected despite a predicted 6% rise in private sector work in the next two year, as the public sector contracts by 17%. This collapse will be led by public sector housing, with a contraction in starts of 40% over the next two years.

Output in the education sector is also set to contract by 46% over the next three years following the cancelling of the Building Schools for the Future programme.

Spend on rail construction, however, will double by 2015 despite a drive for cost savings on major projects including Crossrail and Thameslink.

Michael Ankers, Chief Executive of the Construction Products Association said the stalling of construction growth would impact upon the growth of the whole economy. He added he did not expect the increase in private sector investment in construction over the next two years to compensate for the sharp falls in public sector investment.

“By 2013, however, we expect to see strong growth in the commercial sector,  combined with increasing construction activity related to housing, rail schemes and the development of energy infrastructure, leading to a recovery in construction output at the end of our forecast period,” he said.

“The increase in construction output in 2010 has been an important component of the growth in GDP over the last two quarters. Unfortunately, these latest forecasts show that construction is unlikely to provide the same impetus over the next two years and this will almost certainly slow down the rate of growth in the wider economy.”