UK construction output to rise for three years

Output in the UK construction industry is expected to rise 0.6% in 2016, according to the Construction Product Association’s (CPA) latest report.

The CPA had initially forecasted a rise of 0.4%, before positive data post-Brexit (the UK’s decision to leave the European Union) made for an increase.

There was also an increase in confidence in measures such as the Purchasing Managers Indices (PMI) during September, after falls in July and August.

The CPA said that levels of forward-looking activity such as contract awards had fallen since the EU referendum in June, but insisted such falls would inevitably take time to feed through into construction activity. As a result, despite falls in activity from 2017, in sectors such as commercial offices and industrial factories, total construction output is expected to rise 0.3% in 2017 and 0.2% in 2018.

Noble Francis, CPA economics director, said, “Surveys across the industry highlight that activity in the construction sector has been sustained post-referendum, primarily based upon work on projects that were signed in the 12 to 18 months before the referendum.

“Looking forward, projects in the pipeline mean that construction activity is likely to continue throughout the rest of 2016 and the first half of 2017.”

He added that from the second half of 2017 there was likely to be a clear division between the fortunes of privately-funded construction sectors, and those that were largely unaffected by post-referendum uncertainty, which were either publicly funded or in regulated sectors.

He said, “In construction sectors that are likely to be affected by the uncertainty, new investment has already fallen sharply but the lag between new contract awards and activity on the ground means that the weakening in sector output is likely to occur from the second half of next year.

“Commercial offices output is expected to decline 3% in 2017 and a further 10% in 2018. In the industrial factories sector, construction is expected to fall 11.6% between 2015 and 2018 as renewal and refurbishment of existing factories continues but large manufacturers make fewer new major investments.”