Sector set to decline 5.8% over 2012 and 2013

state of play

Construction output is set to decline 5.8% over 2012 and 2013, according to a downgraded forecast by the Construction Products Association.

The sector is on course to crash by 4.5% this year, followed by a 1.3% decline in 2013.

The industry will have to wait until 2014 for growth, when the CPA forecasts a rise of 2.8%.

The CPA said in a statement: “The majority of this decline is a result of the cuts to the capital budget and is being exacerbated by a lack of recovery from the private sector which will experience virtually no growth over this same period.

“Once recovery starts in 2014 there will be a rapid rise in activity and growth is expected to remain buoyant for the foreseeable future, but until then construction is likely to have a significant drag on the UK economy as a whole, despite numerous government initiatives, which to date have had little impact in reinvigorating the economy.”

Other key findings included:

  • Construction output to fall 4.5% in 2012 and 1.3% in 2013
  • Housing starts to fall 3% in 2012.  The 3% rise expected in private housing is offset by a 23% fall in public housing
  • Green Deal to have little effect on private housing repair, maintenance and improvement
  • Commercial offices construction to fall 2% in 2012
  • Rail construction to rise 55% in just three years
  • Energy construction to rise 115% by 2016

Noble Francis, CPA economics director, said: “Between now and 2014, total construction is expected to lose £10 billion as public sector construction activity falls away sharply. 

“Although this has been expected for some time following the government’s deficit reduction plan announcements, the hoped for recovery in the private sector, which was expected to offset these falls, has not materialised. 

“Although the medium term prospects are more encouraging, if government is serious about lifting the economy out of recession quickly, it needs to ensure that it focuses clearly on public and private investment, rather than a series of announcements and initiatives that lead to very little activity.”

Shadow construction minister Iain Wright said: “On top of the IMF’s damning verdict on ministers’ failed economic plan this week, the forecast of two years of decline in construction only reinforces the need for the government to change course.

“The sector is crying out for a government which steps up to support it but the Tory-led government is slashing public sector construction work and, as the business secretary himself admits, is failing to offer a compelling vision for the future to encourage investment.

“The construction sector is a key part of the solution to our economic problems and the government needs to recognise this. That is why I have called for a construction summit to be convened, and alongside this, Labour’s five point plan would help construction firms now by bringing forward vital infrastructure projects and giving a one year National Insurance tax break to small firms taking on extra workers.”

 

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