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Thu June 17 2021

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CITB downgrades growth forecasts in wake of Brexit vote

8 Nov 16 The Construction Industry Training Board (CITB) has downgraded its growth forecasts in the wake of the UK voting to leave the European Union.

Despite no new trading agreements even close to being in place to replace the current EU regime, CITB’s economists have determined that UK construction will grow at an average rate of 2% a year for the next five years. This is less than the 2.5% average annual growth that they were predicting at the start of 2016.

The forecasts are contained with the CITB’s Construction Skills Network report, which also envisages construction’s employment growth rate slowing. The annual UK-wide recruitment requirement has fallen by a third, from 232,000 to 157,000, the report now says. It predicts that over the next five years, the industry will now need 25,350 new workers every year in England, 3,540 in Wales, 1,810 in Scotland and 650 in Northern Ireland.

While construction growth will average 2% a year nationally, the report says, there will be substantial regional variations. Wales’ average growth rate will be 5.7%; southwest England will average 2.8%; northwest England 2.2%. However, in Scotland construction output will shrink by an average of 0.6% a year over the next five years; construction output in northeast England will shrink by 0.1% a year on average and by 0.2% in the east Midlands, the CITB says.

The biggest shift in the forecast is for the Greater London region where growth has fallen two percentage points from 3.5% in January’s forecast to 1.5%.

CITB director of policy Stephen Radley said: “Our new figures reflect the increased uncertainty in a Brexit-facing world. While construction’s slowdown cannot be solely attributed to the result of the vote, it has certainly intensified and hastened any decline in growth.

“Recently trading conditions have become more difficult, and margins are being further squeezed. But Brexit has introduced an unprecedented number of unknowns and construction is beginning to feel the repercussions.”

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Infrastructure output is a key driver of the forecast overall, with Hinkley Point C providing a particular boost to the figures. But even this leading subsector is likely to contract more than previously anticipated, the CITB says. This is largely due to a pause in road building, and weak performance in the electricity subsector for the first time in many years. While further project cancellations are not expected, slippage may also affect the forecast for the next five years.

The outcome of the referendum vote is expected to have the biggest impact on the private commercial sector where output is expected to fall from 3.4% to 1%. This sector relies heavily on overseas investors in the London market. The capital’s office development cycle had probably already peaked but the referendum result is likely to sharpen the downturn.

Private sector house building is expected to hold up well, with projected growth at 1.6%, down just 0.3% on the previous forecast. Work in the repair and maintenance sector, however, is down from 1.2% to 0.7%, as a result of limited disposable household income. 

Stephen Radley added: “While on the whole the outlook has worsened, we do need to keep some perspective. The economy is bearing up reasonably well in the wake of the uncertainty and construction has a healthy programme of major projects and infrastructure works in the pipeline. Projects such as Hinkley, Wylfa and HS2 will undoubtedly buoy up the sector in the medium term.

“However, delays and uncertainty over investment decisions and access to migrant labour will likely intensify as Brexit nears. While employers’ main focus in the short term will be to weather the storm, it’s also important that they equip their workforce with the right skills for the challenges ahead.”

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