Increased public expenditure by the government will not prevent construction output falling steeply in 2009, according to figures released this week
Economic consultant Experian is predicting that output will fall nearly 7% to £77.7bn, with the collapse in the housing and commercial markets largely to blame.
James Hastings, head of construction futures at Experian, added that the forecast for next year may have to be revised because of a further collapse in sentiment since the report was researched.
Experian is predicting output will grow 1.8% to £79.1bn in 2010, but Hastings said statistics released since the start of the year meant output was unlikely to recover as fast as that.
He said: “My feeling is that it will be flatter in 2010 and there will be a longer period of stagnation than we envisaged.”
Experian is predicting that the value of housing output will be £6.3bn this year, below the level of the early nineties.
Figures released by the government show that the economy shrank 0.5% in the third quarter of 2008 and will officially go into recession on 23 January when the latest figures are released by the Office for National Statistics.
These had been expected to show that the economy contracted by a further 0.5% but Hastings said some research groups were predicting the drop could be as high as 1.5%.
Earlier in the week the Construction Products Association (CPA) published an even gloomier forecast for 2009. These predict that output will fall 8.5% to £76.2bn. The last time it reached this level was in 2002 when the figure stood at £74.1bn. The fall is the biggest on record.
Experian and the CPA said infrastructure projects such as the Thameslink upgrade and Crossrail would help prop up the industry over the next few years. And both forecasts highlighted the importance of public spending, particularly education projects.
Balfour Beatty and Interserve both issued trading updates this week that stressed the importance of public sector spending to future performance.
Hastings added: “We’ve got a government this time around that has said it won’t pull back from capital expenditure.”
Michael Ankers, chief executive of the CPA, said he was not optimistic about growth returning in the next two years. The body is forecasting that output will be broadly flat in 2011 and will grow again the following year.
Ankers added: “The government after the 2010 election will have to start repaying some of its debt and that could mean a cut in public spending before the private sector has gathered momentum again.
Brick producers on the rack
Brickmakers have been severely hit by the housing downturn, and Michael Driver, the director of the Brick Development Association, said there was no upturn in sight.
About 2.4 billion bricks were sold in 2007 but the group, whose members include Ibstock and Hanson Building Products, said stock levels in warehouses were 60% of their annual output compared to the usual figure of 20% for this time of year. This is despite output having halved last year.
Driver said: “Nobody is buying.”