Output set to dip in 2005

The dip in output was down to the slowdown in the UK economy, which had made investors more cautious when it came to putting money into building projects, the firm said.

The subdued economic climate is likely to impact on government spending next year, the report added, threatening the current high levels of spending on education and health projects.

But EC Harris predicted a slight output recovery of 0.7% in 2006 and a further 2.8% increase in 2007.

Meanwhile, tender prices will rise across the UK by 4.6% over the next year and by 3.5% in the year to the fourth quarter of 2007.

Future growth would be led by the top end of the private housing market, especially inner city high rise schemes, and increased activity in the commercial offices market, particularly in London.

“The workload forecast is not gloomy across the board,” the report said, “but one of the main drivers of growth – the public non-residential sector – is now expected to slow. The procurement of large PFI hospital schemes has been going through problems, with lack of bidders bedevilling the largest schemes and causing them to be withdrawn or reduced in scale.”

Looking back to 2005, construction output in the second quarter of 2005 was 1% higher than the previous quarter and 1% higher than the second quarter of 2004.

Winter 2005 Economics Survey – UK, was written by Paul Moore, EC Harris’ head of cost research.