Construction is facing a three-year recession, the Construction Products Association warned this week after the financial crisis forced it to revise its forecasts

The CPA is now predicting that the industry’s output will decline 7% over the next three years, with 2011 the earliest it can expect a return to growth.

The picture has darkened compared with three months ago, when the CPA predicted that output would drop 3% over two years.

The housing sector will remain the hardest hit as the banking crisis will continue to choke mortgage lending. The outlook is likely to change depending on whether the US government’s proposed $700m bail-out of its banking system is successful.

The CPA foresees private housing starts remaining at record lows until at least 2012.

Everyone has been talking about a recession and finally we’ve got one. It’s going to be 2009, 2010 before things start returning to normal

Rob Knight, Igloo

Private housing states have fallen 40% since last year and the CPA is predicting a 24.1% fall in output this year, followed by a 10.4% drop in 2009. Although the market is expected to pick up in 2010, it is not expected to reach 2007 levels until 2013.

The repair and maintenance, commercial and industrial sectors are all also expected to decline, with education, health and the London Olympics compensating slightly.

Michael Ankers, the chief executive of the CPA, said: “These forecasts are the gloomiest we have produced since compiling this information.”

The CPA's four-year output forecast