‘Perfect storm’ warning for UK construction

By Sandy Guthrie23 July 2012

A return to growth for UK construction output in 2014 will happen only after a further decline of almost 6%, according to the latest Construction Industry Forecasts published by the UK's Construction Products Association.

It claimed that UK construction was set to endure what it described as "a perfect storm" over the next 18 months ­- deep public sector cuts and a slowdown in private sector activity.

In the association's central forecast, construction output is predicted to fall 4.5% in 2012 and a further 1.3% in 2013, driven primarily by sharp cuts in funding for public housing, education and health, but exacerbated by a slowdown in commercial offices and retail.

Once recovery starts in 2014, according to the association, there will be a rapid rise in activity and it expects growth to remain buoyant for the foreseeable future. However, until then, it said construction was likely to have a significant drag on the UK economy as a whole, despite numerous government initiatives which it said had so far seen little impact in reinvigorating the economy.

Noble Francis, economics director of the Construction Products Association, said, "Between now and 2014, total construction is expected to lose £10 billion (€12.8 billion) as public sector construction activity falls away sharply. Although this has been expected for some time following the government's deficit reduction plan announcements, the hoped for recovery in the private sector, which was expected to offset these falls, has not materialised."

He went on, "Although the medium-term prospects are more encouraging, if government is serious about lifting the economy out of recession quickly, it needs to ensure that it focuses clearly on public and private investment, rather than a series of announcements and initiatives that lead to very little activity."

Other key findings in the association's forecasts included the fact that housing would start to fall 3% in 2012. It said that a 3% rise expected in private housing would be offset by a 23% fall in public housing.

It felt that the Green Deal - part of the UK government's Energy Act 2011, aimed at reducing carbon emissions by improving the energy efficiency of British properties - would have little effect on private housing repair, maintenance and improvement, while commercial offices construction would fall 2% in 2012.

The forecasts predicted, however, that rail construction would rise 55% in just three years, and energy construction would rise 115% by 2016.

The Construction Products Association said that the picture within UK construction was highly mixed, both geographically and by sector. It said that despite construction enduring its most challenging period since the financial crisis began, there were regions and construction sectors that were still enjoying growth.

With Europe's largest commercial tower, the Shard, now finished, London and the South East continue to grow, it said, buoyed by high profile projects such as the Crossrail - said to be the largest construction project in Europe - in addition to commercial and housing projects.

However, construction in other parts of the country continues to struggle, according to the Construction Industry Forecasts, especially within the north east and south west of England.

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