Predictions for output revised down and emphasis put on need for strong private sector recovery

The construction sector is set for a gloomy 2012, the Construction Products Association has warned.

Revising its construction output forecast for this year further into the red, the CPA predicted that output will fall 5.2% in 2012 followed by a flat year in 2013 but will return to growth in 2014. In autumn 2011 it predicted output would fall by just 3.6% in 2012.

Michael Ankers, chief executive of the CPA, said: “For the construction industry to return to growth there needs to be a strong private sector recovery, but this is just not happening.”

Simon Rawlinson, head of strategic research at consultant EC Harris, said: “The main driver of the fall is that 2011 was not as bad as we thought it would be and that’s because there was a growth in construction output in the third quarter.”

Rawlinson said he expected the market to be increasingly competitive over the next couple of years with firms taking jobs with little or no margin.

John Connaughton, director at consultant Davis Langdon, said it was easy to think the sector was faring quite well while high-profile projects continued, especially in the capital.

“Although they are big, their share of total output is not that sizable,” he said. “It’s the bread and butter stuff that is suffering at the moment.”

Connaughton added that continued declines in new order figures indicated that output would have to begin to fall more sharply at some point.

The CPA warned that by 2014 output would be down 12% on peak levels reached in 2007. But Rawlinson pointed out that although the fall this year would be big, it would not be as dramatic as the fall experienced in 2009 when output fell by 13%.

The CPA’s report said that a breakdown of the eurozone was the biggest risk to the sector.