The good times are still rolling, but economic experts downgrade output forecasts for next two years.
Senior QSs and economic forecasters have warned that the UK construction sector is set for a slowdown in the next two years, despite buoyant workloads now.

Leading economic forecaster Martin Hewes has downgraded his predictions for output and new orders for this year and next. And Paul Morrell, senior partner at Davis Langdon & Everest, said current conditions reminded him of the market peak of 1989.

In Hewes' report, to be published next week, his predictions for total work in 2001 and 2002 have been revised from 1% growth in each year to 0.3%.

For new work the signs are equally worrying. Hewes has replaced a prediction of no growth in 2001 to a 1.1% drop, and the forecast for next year shows a slightly steeper fall in output than predicted originally .

Hewes said: "There are a lot of worrying signals out there. The housing market is booming, debts are at a record level and the employment market is buoyant. It would not be much of a shock for the balance to be tipped over."

Morrell backed Hewes' reading of the sector. He said: "If you read the signals of today's inquiries, you would think there is no problem. The order books look good, and the balance between workload and resources looks good. But it feels like 1989 to me. We are quarter past the peak of the market."

It feels like 1989 to me. We are a quarter past the market peak

Paul Morrell, DL&E senior partner

He said his main cause for concern was the US economic situation – exemplified by computer company Sun Microsystems' decision to halt work on its £70m Hampshire HQ. But Morrell, who produced a recession planning paper this month, said there was no need for alarm.

"We don't want to talk ourselves into a recession. We are not looking over the edge of a cliff. We are not looking to reduce staff numbers. But we do need to redirect them. Prudent businesses are looking at how they can add value in a low-inflation, low-growth economy."

Other QSs said there was a feeling in the marketplace that a slowdown was imminent. Mark Van Den Berg, UK and Europe director of Northcroft, said: "Everyone is expecting some slowdown. There is a danger it will become a reality."

Roger Fidgen, senior partner at Gardiner & Theobald added: "We are in a waiting period right now. I think the whole economy is waiting to see what is going to happen."

In the Building regional overview, published next week, local contractors and consultants predict slowdowns for the West Midlands and East Anglia.