Growth expected in 2006 and 2007 propelled by resurgent commercial sector

Construction output is expected to rise by nearly 2% this year and 2.7% next year, according to the RICS' latest economic forecast. The rises are being driven by a resurgent commercial sector, which is due to jump by 9% both this year and next.

The output rises follow a 1.1% drop last year, the first decline since 1993. The jump in commercial prospects is off the back of low interest rates and a strong financial services sector with growth in offices approaching 20%, the report says.

However the report does show a dramtic drop in the industrial sector, from 11% this year down to just 1% in 2007 - this is due to a possible slowdown in the the work economy, interest rate hikes and eased capacity constraints.

This year will also see the surge in public housing due to the government's desire to double the units built to 30,000 by 2007/2008. This will lead to a 24% increase in public housing this year and a further 5% rise in 2007.

RICS economist David Stubbs said the stable UK economy was behind the positive forecast. "Government commitment to invest in social housing and a strong financial services sector will ensure the construction industry continues to thrive in the short term."