2011 forecast up as private sector grows

Construction output will fall in 2011, but not as much as expected because of a gradual recovery in the private sector, the latest market forecast from Experian has predicted.

The report, exclusive to Building, said that construction will shrink by 2.1% this year as public sector spending cuts begins to bite, but this is significantly better than the 3.6% drop anticipated in the winter 2010/11 construction forecast.

Private commercial building is set to grow by 2% over the year, with the capital leading the way.

“It is London leading any growth in the offices market,” the report said. “Both the City and West End in the capital saw rising take-up and falling availability, particularly of Grade-A space, during 2010.”

“The prospects for commercial construction this year and next are a little better than those forecast in the winter, but it remains our view that it will be 2013 before any substantial growth in activity is seen.”

The private housing sector is expected to grow by 3% - although the report warns of “fragility” in the market - and infrastructure is set to grow by a single percentage point.

Yet every other sector is due to either contract or stagnate over the next year, with public housing set to shrink 12% this year and a further 30% the next.

The cancellation of the £55bn Building Schools for the Future programme and the completion of the Olympic site will contribute to a 10% dip in non-residential public building this year, and another 25% drop in 2012, the report said.

Experian noted that better than expected order figures had caused it to revise its 2011 estimate for this sector up by 5% since the winter.

The analysis was backed up by the Construction Products Association’s quarterly forecast, out this week. It said output will fall this year by 1% - less steeply than expected because of public sector cuts taking time to be felt.

Another set of data from Experian released last week found that insolvencies in construction had abated since last year, but remained higher than for the economy as a whole.

279 businesses in building and construction failed in February, compared to 310 in the same month in 2010.

Yet 0.17% of construction businesses failed in the month, compared to just 0.8% for the economy as a whole.