Construction output is predicted to increase in the next three years, according to two new reports – just so long as the government sticks to its spending plans
The building industry will be cheered by two reports that predict construction output will grow strongly in the next three years. The forecasts from the Construction Forecasting Research and Construction Products Association say that public spending on infrastructure, schools, hospitals and public housing will help boost output growth to around 3.8% this year and between 3.2 and 3.8% in 2003.

There is a caveat, however. If the government doesn't hit its spending targets, construction growth will be put in jeopardy. "A number of areas of concern remain over the government's ability to deliver," states the CPA report, mirroring what Urban Taskforce chairman Richard Rogers said earlier this year. Government investment is particularly important at the moment as building demand from the private sectors is beginning to slow because of uncertainty in the world stock markets.

When the government money finally filters through, the UK's infrastructure sector will benefit the most. Spending for the 10-year transport plan will push growth up to 8% this year and 10% in 2003, according to CFR. The growth created by investment in hospitals, schools and hospitals is not far behind: predicted rates by the CFR are 8% in 2002 and 6% in 2003.

Construction will also stand to gain from the government's affordable housing initiatives. And the transfer of housing stock to housing associations should bolster the amount of private money being invested in maintenance, improvement and repairs.

One area for concern is the private commercial and industrial sector. The CFR predicts that a gradual slowdown in demand for private offices over the next two years will only be partially offset by government health and education contracts. Industrial building will benefit from a moderate upturn in the fortunes of UK manufacturing but the prospects for the technical, media and telecom sectors still looks bleak.

The CPA's Construction Forecasts 2002-2004 paints a similar picture. It states that public-sector investment and PFIs will be the primary source of growth over the next three years - but it too predicts delay in delivery. The report notes that only three-quarters of the additional spend on construction in the Comprehensive Spending Review will feed through by 2004.

Private new builds will also slow because of higher grant rates and the government's focus on costly brownfield developments, according to the CPA. It accuses local authorities for responding slowly to increased funding from the government, and says that housing stock transfers are behind schedule.

The CPA says weaker consumer spending will eventually curb the growth in retail construction activity. It adds that a lack of major new schemes will keep the entertainment sector in the doldrums, at least until work on Wembley finally begins.

Despite spending delays, the overall picture for construction is relatively rosy. Growth predictions are well ahead of those for the rest of the economy and, as most of the impetus for growth is from the government, construction bosses have the luxury of being able to plan their growth according to long-term spending plans.