… but foresees a slowdown next year as the housing market cools

The Construction Products Association (CPA) has raised its forecast for output this year but has warned that it is likely to be followed by a slowdown next year.

The construction industry is likely to experience sustained growth over the next three years, matching that of the overall UK economy, according to the latest forecasts.

However, the CPA says an anticipated cooling in the housing market, together with poor delivery of planned investment by the water industry and the Highways Agency, will constrain growth, particularly next year.

The latest forecasts indicate that output will rise 3.1% this year, compared with a previous estimate of 2.7%. However, the forecast for 2008 is for a 1.8% increase rather than the 3% predicted in the CPA’s new year forecasts.

Allan Wilén, economics director at the CPA, said: “After two lean years, industry growth is expected to quicken and to be more broadly based. However, this growth will not be uniform across all sectors.”

The commercial sector is forecast to remain the motor of construction growth over the next three years, although the pace is expected to slow next year and in 2009 as the current tranche of orders is completed.

The contribution of PFI schemes to growth is expected to moderate over the next three years but leisure-related output is forecast to strengthen next year and in 2009 as Olympic projects gather pace. The CPA also predicts a modest recovery in health output after two years of decline.

The CPA predicts that public housing repair, maintenance and improvement (RM&I) output will recover over the next three years but warns that the government’s waning enthusiasm for upgrading social housing to the decent homes standard by 2010 will limit progress. Private new housing and RM&I is expected to slow in the next two years.

Less road construction and a weaker than expected pick-up in water industry investment are expected to limit infrastructure growth to 1% this year and the same next year.