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Fri October 30 2020

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Construction heads for double-dip recession

7 Sep 10 The UK construction industry is heading for a double dip recession, according to the latest Construction Products Association industry forecast.

The UK construction industry is heading for a double dip recession, according to the latest Construction Products Association (CPA) industry forecast.

It predicts that construction will be the first major industry sector to fall back into recession following a temporary recovery in the first six months of this year.

Despite strong growth in the spring and early summer, the forecasts show output will fall in the remaining months of 2010 and the decline will continue into the first part of 2011.

Other worrying projects from the forecast are:

  • Construction output will only return to the 2007 pre-recession level in 2019;
  • Public sector including PFI output is expected to fall 26% over the next four years;
  • Private housing starts in 2014 will be 18% lower than in 2006;
  • Total housing starts will still be 41% lower than the figure required to meet anticipated annual population growth.

On a more positive note, the CPA also predicts:

  • Infractructure output will grow by almost 50% between 2009 and 2014, driven by investment in rail infrastructure and energy provision;
  • Commercial output will rise for four years, between 2011 and 2014, yet it will remain 15% below levels seen in 2008.

Michael Ankers, chief executive of the Construction Products Association said: “In 2009 the construction industry suffered its sharpest fall in output since 1974 and whilst there was a bounce back in the first six months of this year, the figures are deceptive.

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“The factors that drove this growth – the short term impact of the last government’s fiscal stimulus; a tentative recovery in the housing market; and the start of a number of major projects in the run up to the Election – are not the basis for a long-term recovery.

“Although 2010 as a whole is likely to be slightly better than 2009, it is very much a year of two halves with construction output slipping back in the second half of the year as a result of growing uncertainty in the housing market and cuts in public spending.”

Looking forward, Ankers added: “The industry needs to see strong private sector growth to offset the significant reduction in public investment that we anticipate over the next few years, but as the latest information on new orders for construction work published on Friday shows, recovery in orders for private sector work go nowhere near what is needed to offset the anticipated 18% fall in public sector construction work over the next two years.

“While we can see the prospects for a pick-up in output in 2012 and the following two years, this recovery is going be slow and hold back a more rapid growth in the wider economy. Even by 2014, output in the industry will not even have recovered to the levels it experienced in 2003.”

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