Group revises down previous estimate to just 0.7%
The Construction Products Association is warning that growth in the industry will slow to a trickle next year.
Forecasters at the group predict that industry output will inch up by just 0.7% – the slowest growth in six years – which is a revision downwards from the previous forecast of 1.2%.
It blamed the tumble on a slowing economy, falling real wages and rising costs adversely affecting the industry.
CPA economics director Noble Francis (pictured) said: “A fall in new investment, especially where it is large international investment looking for a long-term rate of return, is forecast to lead to declines in the commercial and industrial sectors.”
He added that it was vital the government stuck to its pledges regarding a number of infrastructure projects such as the HS2 London to Birmingham railway and the Thames Tideway Tunnel in London.
“Increases in infrastructure investment are also expected to… be the key driver of any construction growth going forward.
“This infrastructure investment will be vital for the industry as a whole. Without it, total construction output would fall by 1.0% in 2018,” he added.
But he warned that too many infrastructure schemes were still plagued by rising costs and problems sticking to timetables with the CPA saying it is no longer including the new nuclear power station at Hinkley Point C in its forecasts because of that project’s history of delays.
“Concerns regarding rising costs and delays to major projects continue to dog the sector so there remains a high degree of uncertainty around infrastructure growth in the next few years.”
The CPA said that growth next year will also be heavily reliant on private housebuilding, although added that it was still too reliant on Help to Buy equity loans to drive housebuilding numbers.
Cast chief executive Mark Farmer, the author behind last autumn’s government review into the constructiin industry, said contractors needed to make sure they didn’t bid jobs in the coming months at cut throat prices which would hit already wafer-thin margins.
He added: “The period ahead is a crucial one for the industry as we enter a phase of likely stagnation or actual falls in some parts of construction output. Rather than cutting tender prices to secure work as ‘loss leaders’, which past experience has indicated is the norm for our industry, the focus in this cycle should be absolutely be on process integration, efficiency, productivity and quality improvement which will create sustainable margins for all.”
There was better news for the remainder of this year with the CPA saying it had upgraded its output forecast to 1.6% - an increase from the previous estimated 1.3% – thanks largely to a rise in work in the public housing repair and maintenance sector following June’s Grenfell Tower fire.
Growth in 2019 is expected to return with the CPA predicting a 1.8% increase in output but it admitted, following the hung Parliament earlier this summer and the UK leaving the EU in March 2019, “the risks around this forecast are considerable”.