Years of growth predicted despite monthly decline

Published:  13 January, 2014

The latest forecast from the Construction Products Association (CPA) puts private housebuilding, infrastructure work and commercial activity at the centre of the industry's recovery over the next four years, despite Office for National Statistics data which shows output declined in November 2013.

The CPA expects construction output as a whole to rise by 3.4% this year and a further 5.2% in 2015. Growth is then expected to continue through till 2017, although the CPA has acknowledged that the long-term sustainability of the recovery post 2015 is still uncertain.

Dr Noble Francis, economics director of the CPA, said: "The construction industry is in a very different place to just one year earlier, when output fell to a level 15.4% below its pre-recession peak. Since Q1 2013 activity has picked up considerably. Initially this was due to a rapid expansion in housebuilding but, more recently, growth in new infrastructure and a recovery in London commercial activity have supplemented further rises in private housing.

"Private housing has seen a rapid recovery, albeit from levels of house building that are half the number needed to meet the number of households created. This growth has been driven by wider economic recovery and government's Help to Buy policy.  Initial concerns were that this policy would fuel house price inflation, but clearly both house prices and housebuilding have risen significantly.  Housing starts in Great Britain during 2013 are estimated to have increased 24%, with further growth rates of 16% in 2014 and 10% in 2015 forecast.

Dr Francis said that after 2015, without the Help to Buy scheme to support demand, there are strong concerns about whether housebuilding will continue to improve.

"In the second half of 2013," he continued, "the infrastructure sector was a key driver of construction growth, with output in the sector forecast to increase 39.7% by 2017. This growth is primarily expected from a recovery in the roads sub-sector, where output fell by over 50% in the space of two years, combined with further growth in rail construction. 

"In the medium-term, from 2015, infrastructure is also expected to be supported by double-digit growth in the energy sub-sector due to main works on the first of the new nuclear reactors at Hinkley Point C.  However, the project has already been subject to considerable delays so further delays cannot be discounted."

Output in the private commercial construction sector fell 33.1% between 2008 and 2012, but sizeable office projects which have got underway in London in 2013 have started a recovery, with this sector expected to grow 2.7% in 2014, following growth of 2.4% last year.

"From 2015, wider economic recovery and a rise in demand for prime office and retail space outside of London and the South East should also boost the sector," said Dr Francis. "The largest constraint to industry recovery continues to be public sector construction.  Public non-housing output fell 27.2% between 2010 and 2012 and the sector is not anticipated to recover until the impacts of capital investment growth feed through in 2015."

The CPA forecast has also predicted a 2% rise in public housing starts both this year and next, with marginal growth thereafter due to government focusing on affordable housing, rather than social housing.

Retail sub-sector output growth of 2% is forecast in 2014, with 5% rises expected in 2016 and 2017, while factories growth of 6% is forecast for 2014. Thereafter, 5% growth per year is projected until 2017. The warehouses sub-sector output is forecast to rise 10% in 2014 and 8% in 2015.

The CPA's growth forecast comes as the ONS reports that the seasonally adjusted construction output fell 4% in November 2013 when compared with the previous month. This, the ONS said, was mainly due to decreases in private commercial work, private new housing and infrastructure. Despite this fall, construction output is estimated to have risen by 2.2% when comparing November 2013 with November 2012.

Stephen Gifford, the CBI's director for economics, said: "Although these figures are disappointing, they only reflect one month's performance and there is a growing sense among firms that the recovery is taking hold. Jobs are now being fairly consistently across the country and, for the first time since the start of the recession, most firms intend to increase their workforce."

Sign Up

For the Builders' Merchants News enewsletter.

In the spotlight


Builders Merchants Vacancies – UK Wide

At Arco, we are an industry specific recruitment consultancy, providing sales and managerial staff Nationwide to Merchants, Distributors and Manufacturers of Building Materials within the Construction Sales Sector. Priding ourselves on our unparalleled customer service and hard work, we offer a fresh, innovative and personal approach to recruitment specifically designed to meet our clients’ needs and candidates’ skills.

Guest Blog by Simon Damp

Is DIY a lost art?

As time goes by, the art of do-it-yourself when it comes to activities around the home and garden is fast becoming more and more of a lost art.