Construction growth to peak at 5.3% before slowing

Aaron Morby 9 years ago
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Industry crystal ball gazers have revised up their growth forecasts once again and predict construction will now expand by nearly 18% over the next three years.

This year’s new growth forecast from the Construction Products Association has been marked up from the earlier estimate of 4.8% in the summer to 5.3%.

On predicted growth rates, construction will top its pre-recession peak within 18 months, before growth is expected to slow due to election uncertainty and capacity constraints.

CPA winter 2015 forecast

Construction forecast 2015

Key points

  • Private house building forecast to rise 10% in 2015 and 20.2% by 2018
  • Offices construction to increase 8% this year and 25% by 2018
  • Infrastructure activity forecast to rise 7.9% in 2015 and 51.5% by 2018

Dr Noble Francis, Economics Director of the Association, said: “Last year’s recovery in construction was driven primarily by 18% growth in private house building.

“This year, industry growth will be more broad-based as a further increase of 10% in private house building is expected to be supported by 8% growth in commercial offices and 7.9% growth in new infrastructure.”

Growth rates are then expected to slow in 2016 and 2017 because of uncertainty regarding the General Election in May, which could give pause to both contract awards and industry investment.

“While this is unlikely to impact construction activity this year, due to the lag between contracts and activity on the ground, it may have an adverse effect on output in both 2016 and 2017,” explained Dr Francis.

Private house building growth is predicted to slow from 10% this year to 5.0% in 2016 and 3.0% in 2017.

Office building activity, which is still nearly 40% below the pre-recession peak, is forecast to grow 7% in 2016 and 5.0% in 2017. Growth in total construction output, therefore, is expected to slow to 4.2% in 2015 and 3.4% in 2016.

Dr Francis said: “The industry also has concerns regarding capacity constraints in the medium-term.

“While output in the sector during 2014 was 8.5% below the level seen in 2007, overall capacity last year was not a key issue.

“However, construction output is forecast to surpass the pre-recession peak during the next 18 months, this despite the industry having lost 343,000 jobs and considerable materials capacity in the seven years following the financial crisis.”

He warned: “As a result, it is essential that there is significant investment in UK construction skills and manufacturing over the next few years if the growth forecast is to be achieved.”

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