UK to see another bleak year with 3% decline in construction output

Construction is among the sectors worst hit by the downturn. (REUTERS)

After an estimated fall of more than 12 per cent in UK construction output in 2009 – the largest in a single year since records began in 1955 – forecasts from Construction Products Association (CPA) predict a further decline of three per cent this year.

And the first tentative signs of recovery are not expected in until 2011. However when it does come, the recovery will be very slow with annual growth of less than one per cent in each of the three years from 2011-2013.

With trend growth in construction output in every year after 2013, it would take until 2021 to reach the level of output that the industry enjoyed in 2007.

Michael Ankers, Chief Executive of CPA, said: "Construction has been one of the sectors of the economy worst hit by the downturn, and while it is widely believed that the wider economy is now out of recession, the construction industry is going to have to wait for at least another 12 months. Output in office, retail, and other commercial projects has been particularly badly hit, and last year's fall of more than 26 per cent is expected to be followed by a further fall of 15 per cent this year. At the same time, output on industrial projects, which has already fallen more than 50 per cent from its 2007 peak, is expected to fall still further during the next 12 months.

"On the positive side, new private house building, which fell to levels not experienced since the 1920s, has started to recover with starts this year expected to be 15 per cent higher than in 2009, and with similar levels of growth in each of the next three years.

"The main concern for the industry is public investment in construction where work on major hospital and schools programmes has helped save the sector from even more dramatic falls in output. Looking ahead, however, the recent pre-budget report confirmed that there would be sharp cuts in government capital spending over the next three years, and if these occur before there is any significant recovery in private sector construction, then there is a real danger that what we currently anticipate as being a three-year downturn will extend even further.

"The construction industry is a major part of the economy and it is hard to see how there can be any significant recovery while construction is still in recession. In addition, what the industry provides in terms of roads, rail and energy infrastructure, as well as modern, efficient, and low-carbon buildings, is key to a sustained recovery in our manufacturing and service sectors. In the run up to the general election, it is critical that the major political parties recognise these points and ensure they are reflected in the policy proposals they put before the electorate."

CPA noted that even with the levels of growth for private new house building in these forecasts, the number of starts in 2013 will still only be 75 per cent of the number achieved in 2007, and only just over half the number that the Barker Review recommended was needed to meet demand. It said the one area where the projections see consistent growth throughout the forecast period is infrastructure, driven initially by investment in rail and road projects, and towards the end of the period by Crossrail and the start of the nuclear programme.

 

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