Construction sector still in free fall

Construction industry forecasts for the coming year indicate the sector will suffer a 12% fall in output – the worst on record – followed by a further fall of 3.4% in 2010.

Significant positive growth is only expected in 2012, and by the end of the forecast period, in 2013, construction output is still expected to be below levels experienced in 2002.

The latest industry forecasts come from the Construction Products Association. Noble Francis, economics director, said: “The current economic recession is now having a major impact on our industry, and this is the most serious downturn most of us in the industry have ever experienced. We have already lost 60 000 jobs, with more expected to follow, and we have an estimated 12 000 construction workers on short-time working.”

The report says that any upturn in construction will be critically dependent on an increase in credit availability in the private sector and government spending, in accordance with its announced plans on the public side.

The CPA anticipates that new housing starts will drop to 70 000 this year, the fewest since 1924. Public housing starts are anticipated to fall 20% during 2009 as they are intrinsically linked to the private market. The commercial sector has slowed considerably since autumn 2008, and output over the next two years is expected to fall 53% in the new-build office market and 40% in new retail construction.

Positive growth is expected to be seen in publicly funded areas such as education, health and rail. But with public borrowing reaching levels that are unsustainable, it is unlikely that public sector construction can grow in the medium term.

“Without delivering its public spending commitments, the government will miss its targets for housing, schools and hospitals,” said Francis. “More importantly, this could turn the construction recession into a deep depression.”