Growth to rebound to 2.7% next year after flat 2018

Aaron Morby 6 months ago
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Construction output will stagnate this year before accelerating to 2.7% in 2019 and 1.9% in 2020 as major infrastructure projects gather speed.

Forecasters at the Construction Products Association say that infrastructure and private housing remain the only two bright spots this year amid a fall-off in commercial work hit by a 20% drop in office construction.

This will see overall industry growth flatline in 2018.

But next year civil engineering contractors will benefit from infrastructure output jumping 13.1% as work accelerates on large projects such as HS2, the Thames Tideway Tunnel and Hinkley Point C.

Spring CPA forecast

  • Construction output to remain flat in 2018 (0.1%) and rise 2.7% in 2019
  • Private housing starts to rise 2.0% in 2018 and 2019
  • Office construction to decline 20.0% in 2018 and 10.0% in 2019
  • Retail construction to fall 10.0% in 2018 but rise 5.0% in 2019
  • Infrastructure work to rise by 6.4% in 2018 and 13.1% in 2019

Noble Francis, economics director at the Construction Products Association, said: “The start of the year was a bad one for construction. Carillion, the UK’s second biggest contractor, went into liquidation in January and led to an hiatus on infrastructure and commercial projects.

“The snowy weather badly affected work on site for at least three working days in February and March and, as a result, 2018 Q1 construction is likely to be £1.5bn lower than in 2017 Q4.

“Half of the activity lost in Q1 is expected to be regained during 2018. Work on some Carillion projects has already restarted, on joint-ventures or where major clients such as Network Rail have been keen to continue work.

“Other projects will take time to retender but are still likely to restart this year. Large infrastructure projects should also allow for a catch-up after the adverse weather and often have penalty clauses for delays. Despite the sector’s strong growth prospects, questions remain about poor government delivery of major infrastructure projects.

“Private housing starts are expected to rise 2.0% in both 2018 and 2019 in spite of the slowdown in the general housing market as Help to Buy is clearly sustaining demand for new build homes. Outside London, house building will rise quicker than this but growth overall will be constrained by the ongoing fall in demand for high-end residential in the capital.

“The growth in infrastructure and private house building this year is forecast to offset falls in the hard hit commercial sector, where Brexit uncertainty continues to hit international investment in new office towers in London and high street woes affects the construction of new retail.”

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