Housing growth spurs optimism across industry

The construction sector will return to strong growth from next year, driven by an expansion in the housing sector, the Construction Products Association predicts

The CPA’s revised forecast says construction output will grow 2.2% in 2014 after contracting 1.5% this year. This will be followed, it says, by 4.5% growth in 2015, 5% in 2016 and 4.7% in 2017. The numbers are much higher than the body’s last forecasts in April, when it said output would fall by 2.1% this year and grow by 1.9%, 3.8%, 4.7% and 4.5% over the next four (see graph).

CPA economics director Noble Francis said the changes reflected the anticipated expansion of the private housing sector. The CPA predicts the housing market will continue expanding strongly, with private housing starts rising 15% in 2013, and growth until 2017 averaging 9% per year. Infrastructure is also expected to be a major driver of growth from 2014.

After a tough few years, it’s good to see optimism returning in the sector

Suzannah Nichol, NSCC

Francis said: “Recent housing policies have proved that when government announcements are followed through, the result is immediate and significant. Should the government do the same in other parts of construction, this industry will further support the wider economic recovery.”
The CPA’s revised forecasts come amid encouraging signs of recovery across the industry, with the latest Markit/CIPS survey reporting a continuing rebound in activity in July, driven particularly by expansion in the housing sector.

The index hit 57 in July - up from 51 in June and significantly above 50, which separates growth from contraction. This was the fastest rate of growth since June 2010.

The survey of UK construction buyers found higher levels of business activity across all main areas. Residential building activity was the strongest performing category, with growth surging to its steepest since June 2010. Growth in housing activity has now been recorded for six months running.

Meanwhile, the National Specialist Contractors Council’s latest survey found a balance of 25% of specialist contractors were looking to expand their businesses over the next quarter, the highest level since the downturn started in 2008. In Q2 2013, a balance of 25% reported an increase in enquiries, the highest since Q4 2006.

NSCC chief executive Suzannah Nichol said: “After a tough few years, it’s good to see optimism returning in the sector.”