Three year slump predicted

The Construction Products Association last week produced revised output forecasts for the next three years, downgrading its predictions produced just three months ago.

Now, the organisation is predicting a 2% output decline in 2008, and a further 5% in 2009. This compares with the 32% increase in output between 1994 and 2007.

Public sector spending is likely to hold steady next year, but with public finances and tax revenues lowered by the crisis, the position is expected to worsen in 2010.

Quoted in Building, CPA chief executive Michael Ankers said : “These forecasts are the gloomiest we have produced since compiling this information.”

The CPA says that the housing sector will remain the hardest hit by the credit crunch, with private housing starts remaining at record lows until 2012.

Brickonomics, a blog posted on Contract Journal’s website, has looked into the CPA’s figures in more detail and draws some comparisons with the early 1990s recession.

“The grimmest news in the forecast is the change in sentiment towards the commercial sector. Peaking this year, the expectation is that workload in the sector will collapse by almost a quarter,” the blog says.

In the early 1990s, it recalls, industry output fell by 13-14%. And despite the common assertion that money switches from new build to repair and maintenance during a recession, output in repair and maintenance in fact fell by 19%.

“However, the CPA’s forecasters foresee a much shallower drop this time around in the RMI sector than in new work. They could be right, but I remain sceptical,” it says.