Three year outlook for construction worse than feared

The outlook for the construction sector over the next three years is gloomier than previously thought, according to exclusive analysis by Hewes and Associates.

The construction data services firm has forecast that after growing by 6.4% in 2010, output in the sector is likely to fall by 3.4% this year, 8% in 2012 and a further 1.8% in 2013. This compares with earlier research by the firm predicting a 3.5% fall in 2011, 5% in 2012 and 1.3% in 2013.

The total value of all construction work is predicted to fall from £113.5bn in 2010, to £110.9bn in 2011, £103.9bn in 2012 and £104.1bn in 2013, a drop of 16% from 2007.

The largest dips are forecast for public sector work, which is set to reach its nadir in 2012, when output is forecast to dip by over 20%

As expected in the wake of widespread public sector funding cuts, the largest dips are forecast for public sector work, set to reach its nadir in 2012, when output is forecast to dip by 21% for public sector housing and 27% in non-housing.

“Public spending is about to be scaled back,” said the authors of the report. “A more than offsetting improvement in private sector activity is hoped for, although with households still heavily indebted, monetary policy unable to help and real wage growth in decline, the chances of that appear slim.”

The figures do contain some cause for hope, however. Industrial output is one of the areas that is expected to grow over the period. The analysts predict an increase in output for the sector of 6.2% this year and 4.1% in the two subsequent years.

But industry commentator Brian Green said he didn’t see “any great signs of breakthrough”.

“If we look at the eighties we had large amounts of North Sea oil, in the nineties we had the upside of cheap imports as a result of globalisation.

“So far the projections for growth have been optimistic and the forecasts for inflation have been overstated - that will fade.”