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Construction output to grow in 2019

CPA forecasts 2.3% rise on back of new housing and infrastructure following poor performance in 2018

According to the Construction Products Association (CPA) summer forecast, total construction output is expected to rebound to 2.3% after dipping to 0.6% in 2018.

The forecast cites the collapse of Carillion and the ‘Beast from the East’ as dragging down activity, with £1bn of work lost due to the liquidation of the main contractor in January and a further £1bn from the exceptionally poor weather during the first quarter.

The CPA estimates that approximately 60% may be recovered during the rest of the year through longer shifts and weekend working, however increased costs may hit margins, especially where there is a shortage of skills.

Aside from the two big infrastructure projects – HS2 and Hinkley Point C – which are driving overall construction growth, private house building remains the strongest area of growth.

House building outside of London, will drive this growth on the back of continued demand for the government’s Help to Buy scheme. The picture is different in the capital, where there remains both a sharp decline in demand and an oversupply in the prime residential market.

Investor caution due to uncertainty over Brexit is continuing to adversely affect the commercial sector, especially offices, which is expected to fall 20% in 2018 and a further 10% in 2019. Meanwhile, new retail construction continues to suffer from the shift in consumer behaviour towards online shopping and is expected to fall by 10% this year.

 

At a glance

  • Construction output to fall by 0.6% in 2018 before growth of 2.3% in 2019
  • Private housing starts to rise by 2% in 2018 and 2019
  • Commercial offices output to fall by 20% in 2018 and by 10% in 2019
  • Commercial retail output to fall by 10% in 2018 and remain flat in 2019