CPA now predicting a decline in workloads this year after forecasting growth over the winter
Continued Brexit uncertainty is expected to hit construction worse than first hoped, the Construction Products Association has said.
The ongoing confusion over the UK’s departure from the EU is having an impact on investment, regional housing markets and concerns about the ability to deliver major infrastructure projects, according to the group.
The CPA’s latest forecasts anticipate overall construction output falling by 0.4% in 2019, revised down from a forecast of marginal growth of 0.3% in its winter forecast.
Growth of 1.4% is forecast for 2020, driven by activity on major infrastructure projects but also supported by sharp increases in warehouses and ports activity.
Noble Francis, economics director at the CPA, said: “Brexit uncertainty has had a large impact on sectors dependent upon high upfront investment for a long-term rate of return, especially where the investment is from international investors.
“It has so far hindered investment in new offices towers, factories and high-end residential and, given a 12- to 18-month lag between new orders and activity on the ground, output in these sectors will be adversely affected in 2019 and 2020 at the very least.
“Conversely, the uncertainty has provided a boost to demand in small sub-sectors such as warehouses and ports, which are both expected to enjoy double-digit growth in 2019 and 2020.”
Office and factory outputs are forecast to fall 11% and 15% respectively in 2019, with further falls of 4% and 10% in 2020.
The infrastructure sector is expected to experience the strongest growth rates across the next two years, with growth of 9.3% forecast for 2019 and 9.7% for 2020 despite questions about the government’s ability to deliver projects such as HS2 and the expansion of Heathrow airport.
Without this infrastructure growth, it is forecast that the construction industry would experience a 1.8% fall in 2019, followed by two years of stagnation.
Private house building activity is forecast to remain flat over the period reflecting housebuilder caution over the slowdown in demand and falling prices in London.
But public housing starts are expected to rise 2% in 2019 and 5% in 2020 because of an increase in the affordable housing market.