London and Wales to lead industry growth into 2008

London, Wales and the east of England will experience the greatest growth in construction output over the next two years - but this will be weak compared with recent years, according to a regional forecast by economic consultant Experian.

Output growth 2001-2008

Construction in Wales is expected to expand the most over the period, with an 18% growth in output. According to Experian, it will be buoyed by increases in Welsh assembly spending on health and education, as well as retail, leisure and regeneration schemes.

However, because of its relatively small scale, modest rises in construction spend in Wales can create large percentage shifts.

Greater London is expected to benefit from regeneration in the Thames Gateway, the 2012 Olympics and improved infrastructure.

Experian predicted that the northern regions were likely to be the weakest to 2008. This contrasts with the early part of this decade when, according to Experian, public spending helped construction output to outstrip that in the South.

Yorkshire and Humberside is set to fare worst, with output growth likely to be less than 5%. Experian argues that activity there will be affected by a short-term decline in the private housing sector and a stagnant commercial market.

Overall, regional growth is expected to be weak up to 2008 compared with growth between 2001 and 2004 (see graph left). Across the UK output is forecast to rise 13% to 2008, with four other regions apart from Yorkshire and Humberside trailing the national average: North-west, East Midlands, the North-east and Scotland.

James Hastings, associate director at Experian, said: "The relative importance of drivers of output growth differs in the South and the North. Commercial takes a much greater share of new work in the South and so better economic prospects immediately give the South the edge.

"A recovery in offices in Greater London in 2005 is a good example, which going forward is expected to feed through into increases in speculative development. The North's proportionately greater reliance on publicly funded construction will constrain further growth, although output is expected to be maintained at a relatively high level."