Output in the construction industry will continue to fall throughout 2008 and 2009, according to research from the Construction Confederation and CPA’s joint trade survey report, released last month.

The report reveals that the construction industry should prepare itself for a difficult couple of years as rising energy prices and materials costs start to bite.

A total of 48% of contractors reported a drop in private housing output and 26% in public housing for the second quarter of 2008. And hopes for the third quarter are not high, with 39% of contractors expecting a further decline in output and 68% of manufacturers reporting that poor demand is expected to limit output growth over the next 12 months.

Noble Francis, economics policy development director at the CPA, said: ‘The further reduction this quarter, although predictable, is of great concern for many parts of the industry. Increased energy costs and high demand for materials from countries such as China and India has led to consistent rises in material prices, which in turn is leading to a reduction in profit margins. Output is definitely falling in the private sector and therefore it is essential that government spending is not significantly cut.’

The report also suggests that 2007’s GDP growth of 3.1% could be halved in 2008.