Delayed recovery

Published:  05 October, 2009

LONDON: Output in the construction industry will experience its sharpest fall since 1948 this year and is not expected to return to significant growth for more than a decade.

The Construction Products Association today forecast a 15% contraction in the sector's overall output in 2009 and warned that pre-downturn investment trends will not be seen again until 2021 at the earliest.

Noble Francis, economics director at the CPA said: "The construction recession has disproportionately hit the small and medium-sized specialised firms so far, with some of the largest contractors able to operate in other areas of construction that still have good growth."

"However, with sharp falls in private sector construction currently and anticipated falls in public sector construction in the medium term, it is unlikely that even the large contractors will be isolated from the downturn," he said.

The CPA estimates that spending on business and retail premises will fall 40 per cent in 2009 and 2010 as private investment dries up and rising insolvencies create an excess of supply.

Analysts warn that construction company margins will be squeezed to as little as 1.5%. Andy Brown, construction analyst at Panmure Gordon, said: "The pressure on margins won't be instant, but it will filter though and as the slowdown continues, it is likely customers will become pushier on prices."

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