Vaccine rollout to power construction to 14% growth this year, CPA says

Construction output is expected to rise 14% this year as the covid vaccine rollout injects new life into the industry, according to a Construction Products Association (CPA) forecast.

The recovery follows a 14.3% overall contraction in 2020, with output not expected to return to pre-pandemic before next year when the sector is expected to continue growing by a further 4.9%.

Predicting a ‘W’ shaped recovery, the CPA’s winter scenarios forecast expects the recovery to begin from the second quarter this year following the presumed easing of the third national lockdown as the impact of the vaccines begin to thaw the virus’ grip on the wider economy.

But output is expected to slump again later in the year if the end of the furlough and self-employment support schemes in April cause a sharp rise in unemployment.

The end of the stamp duty holiday and the first phase of Help To Buy on 31 March is also forecast to put the brakes on a still flourishing housing market, which was seeing mortgage lending and property transactions higher than pre-covid levels at the end of last year.

While the forecast expects housing and most other construction sectors to pick up again in the second half of this year in line with a recovery in the wider economy, the fortunes of the struggling commercial sector are less easy to predict.

This sector was slow to recover last year as store closures, low rent collection in retail and leisure and the ongoing prevalence of home working limited any potential rebound. 

The CPA said that its recovery over the next two years will be further constrained by the pandemic’s acceleration of the decline of the high street, while the future of the office market will be decided by the still unknown degree to which home working will persist after the end of lockdown restrictions.

But the loss for commercial projects has been a gain for private housing repair and maintenance as home working has seen households invest accumulated savings from lower daily expenditure back into their homes.

Cladding work is also expected to drive activity in public housing repair and maintenance over the next two years as the government’s Building Safety Programme moves beyond the removal of combustible Grenfell Tower-style cladding.

Reacting to the analysis, CPA economics director Noble Francis said that questions over the long term impact of the pandemic on certain construction sectors still remain.

“This is most notable in the commercial sector, where there is still lots of uncertainty about the future of retail and office space. 

“It will be crucial to observe how businesses change their operations as the vaccine is rolled out in the coming months and to what extent there is a ‘return to the office’.”

But he added that infrastructure had proved to be largely immune to the impact of lockdown restrictions, with projects having been able to effectively put in place safe site operating procedures while government funding has kept the sector steaming ahead throughout the pandemic. 

“As such, infrastructure has been least-affected by Covid restrictions and output is expected to lift the whole industry over 2021 and 2022. 

“Main works on HS2, Europe’s largest construction project, along with offshore wind and nuclear projects are expected to be the main drivers of activity.”

Figures for the wider economy published by the ONS last week revealed that GDP fell by 2.6% in November last year, bringing an end to six months of consecutive growth over the summer as the economy recovered from the first wave of the virus.

Despite the downturn, construction output staged a dramatic rebound in the same month with growth of nearly 2%, reversing a trend of slowing growth in the sector seen between June and October and bringing output levels to 0.6% above those seen in February before the first national lockdown.