Winter forecast suggests UK construction could be heading for ‘lost decade’ in the style of Japan with zero or very low growth
The construction industry could be facing a “lost decade” analyst Experian has said.
The firm’s winter forecast said a decade of zero or very low growth was a distinct possibility for the sector as public spending cuts bite and private sector growth remains elusive.
Experian’s latest forecast follows that of the Construction Products Association, which last week predicted a 5.2% fall in output in 2012 followed by a flat year in 2013 and the return of growth in 2014.
The coalition has already indicated that debt reduction is not running to plan
Experian’s report said: “Discussion has already emerged along the lines of whether the UK is facing a ‘lost decade’ in the style of Japan. In construction terms, this is certainly feasible.
“The coalition in its autumn statement has already indicated that debt reduction is not running to plan and a further two years of belt tightening may be needed in the public sector. Combine this with sluggish economic growth and it becomes difficult to see which sectors would be driving construction output growth.”
Experian said the only sector it predicted to remain buoyant was infrastructure. It argued that the UK’s first new nuclear power station and the Crossrail project, which is due to peak in 2014, would see this sector bucking the trend.
However, it added that this would not be enough to drive growth across the construction industry after 2014.
Simon Rawlinson, head of strategic research at EC Harris, added: “If no new sources of private finance for infrastructure emerge over the next three to four years and if the Green Deal doesn’t get going, there could well be the prospect of weak output growth over the next 10 years.”
But he pointed out that the government’s infrastructure plan includes around £150bn of private investment, much of which is expected to be gained from pension funds.