Opportunities remain in rail and energy construction

The fall in construction output over the next two years is set to be steeper than previously predicted, according to the latest forecast by the Construction Products Association published today.

The CPA has revised down its predicted growth figures in its autumn quarterly forecast to put them further into the red in the face of continued economic uncertainty, government spending cuts and the euro zone crisis.

In its summer quarterly forecast the CPA had estimated the industry output would fall 0.5% in 2011 and 2.8% in 2012.

However, now the CPA predicts that output will fall 1.1% this year and further 3.6% next year.

Its October report said: “Given that the private sector accounts for over 60% of total construction, it has the potential to offset falls in public sector construction. However, with a subdued economy, uncertainty in the eurozone and instability in the international markets, there is little to suggest that private sector will grow considerably near term.”

Output is only expected to return to growth in 2014 at 3.7% and 2015 at 4.7%.

The CPA said the biggest opportunities over the next four years were still opportunities in rail and energy infrastructure. The rail sector is expected to grow 77% over the next three years. Plus, the building of the UKs first new nuclear power stations since 1995 will see output in the energy sector increase 191% over the next four years.

Unsurprisingly the CPA expects the education and health sectors to be most heavily affected over the next three years as government capital spending nosedives. Education and health construction are expected to fall 41% and 45% respectively.

Housing is expected to fair slightly better growing 3.5% this year before falling 2.8% in 2012, largely driven by a 20% contraction in public sector housing build. It will then return to consistent growth in 2013.

Construction of office space will rise 5% in 2012 and 14% in 2013, according to the forecast.

In August the CPA’s economics director Noble Francis warned that stock market volatility would slow down the sector in the second half of the year. He said it “adds to the uncertainty and reduces consumer confidence”.