Construction Products Association downgrades industry forecast

October 15, 2019 / Isla MacFarlane
Construction Products Association downgrades industry forecast

The Construction Products Association’s (CPA) has slashed its Autumn forecast for construction output, predicting that growth will be half what it originally forecast in the summer.

Autumn Forecasts for construction output growth in 2020 and 2021 have been downgraded from 1.0% and 1.4% to 0.5% and 0.9% respectively. Unsurprisingly, the CPA named Brexit uncertainty as a reason for the downgrade, with slower house prices contributing to the pessimism.

CPA’s Economics Director, Noble Francis, said: “Construction activity is expected to grow by only 0.5% during 2020, even assuming a smooth Brexit involving a deal or, more likely, another extension to Article 50. The uncertainty created over when and how the UK will leave the EU has affected new investment in parts of private housing and commercial, the two largest construction sectors.

“Add to this growing concerns about the government’s major project delivery and the next two years are expected to be challenging in spite of a raft of infrastructure projects in the pipeline and a strong latent demand for housing.”

The CPA predicted that starts in private housing will fall 2.0% this year, with weaker demand in southern regions of the UK acting as a drag, before returning to growth in 2020 as the economy settles and underlying demand for new build house purchases is enabled by Help to Buy.

The public housing sector’s prospects are more positive due to grant funding on the Shared Ownership and Affordable Homes Programme, although there are signs of vulnerability as housing association development is increasingly linked to the slowdown in the general housing market, it said.

Francis said, “Private housing starts are expected to fall by 2.0% this year before rising by 1.0% as falls in housebuilding in London, the South East and East are expected to be offset by growth in the North West, Yorkshire and the Midlands.

“Commercial sector output is forecast to fall by 6.9% this year and a further 4.7% in 2020 as a lack of upfront investment in offices towers for a long-term rate of return is exacerbated by a continued decline in retail construction as spending shifts online. It’s certainly not all bad news, however, as infrastructure is forecast to rise by 11.2% this year and 3.7% in 2020 in spite of poor delivery of major projects.

“If government were able to improve its delivery of major infrastructure then this could drive strong increases in construction activity as well as boosting UK economic growth and productivity.”

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