Construction recovery still a year off, CPA warns

Construction output is set to fall by 2% this year, with any recovery in the industry still another 12 months off, the Construction Products Association has said.

According to the latest CPA forecasts, construction output is set to decline 2%, dragged down by a fall of 5.7% in the commercial sector, the largest sector of construction.

The forecast 2% contraction follows a nearly 9% decline in 2012, the CPA said.

According to the forecast:

• housing starts in 2013 forecast to be 122,000, which is fewer than half that needed to meet the number of new households;
• retail construction output is set to fall 10%;
• output in education construction is to fall 9.8%;
• health construction output is to fall 8.7%;
• but, in a positive note, roads construction output is set to rise 8%, following 45% fall in 2012

The CPA forecast follows a similarly gloomy forecast from Experian last week, which predicted output to decline by 3.5% this year, before growing by just 0.8% in 2014.

Adding to the grim picture, the lastest ONS construction output figures, released on Friday, showed there was a 3.4% decline on output between October and November and 9.8% decline, year-on-year, for the three months to November.

Noble Francis, CPA economics director said: “Public sector construction work continues to bear the brunt of the government’s austerity drive and has fallen by 15%over the last two years.

“Our Forecasts show that it is expected to continue to fall by a further 7% this year. Unfortunately, growth from the private sector, which government hoped would compensate for this decline in public sector activity, has not materialised and it too continues to contract.

“With new orders for construction falling significantly at the end of last year, 2013 is going to be a difficult year for the construction industry with output forecast to fall 2.2%.

“As the construction industry accounts for nearly 9% of GDP this contraction will be a major constraint on growth in the wider economy over the year ahead.

“However, despite these forecasts, there are some sectors of construction where growth is anticipated. “Private house building is expected to grow 6% in 2013 boosted by the Bank of England’s Funding for Lending Scheme and infrastructure investment, identified by government as essential for the recovery, is set to grow throughout the forecast period, due partly to Crossrail, the largest construction project in Europe, as well as the critical investment in energy that is long overdue.

“Investment earmarked by the Chancellor in his autumn statement for road maintenance should provide some much needed activity across all regions of the UK, but it is important that this work is started immediately and used as a springboard for other economic activity if it is to have the desired impact.”