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Sat February 16 2019

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Construction boom for Brexit stockpile warehouses

21 Jan Construction industry economists have sharply downgraded their growth forecasts for the industry as Brexit-related uncertainties intensify.

Big shed bonanza for Brexit stockpiles
Big shed bonanza for Brexit stockpiles

However, some sectors are experiencing a Brexit-related boost, with anticipated changing patterns of trade boosting construction of harbours.

There is also a sharp rise in warehouse construction for stockpiling goods and materials whose supply is impacted by the UK’s new trading status. The big shed boom is also fuelled by the growth of online retailers at the expense of the high street.

Just six months ago, the Construction Products Association was forecasting 2019 construction output would rise by 2.3%. But the CPA’s winter forecasts now anticipate activity to rise by only 0.3% this year.

And it could be even worse with a no-deal Brexit. The CPA’s forecasts depend on a deal being done with the EU.

Private housing and infrastructure sectors remain the primary drivers of industry growth in the coming years. The confirmed extension of the government’s help-to-buy scheme through to March 2023 continues to encourage housebuilding activity, with output forecast to rise 2% in 2019 and 1% in 2020.

The infrastructure sector is expected to reach its highest level on record in 2019 driven by large projects such as HS2, Thames Tideway and Hinkley Point C. Infrastructure growth is forecast to rise by 8.8% in 2019 and 7.7% in 2020. There remain concerns, however, about government’s ability to deliver major infrastructure projects, as highlighted by the cost overruns and delays on Crossrail and suspension of the second new power station, Wylfa Newydd.

Brexit uncertainty is blamed for an expected decline in the commercial sector; office construction output is expected to fall 20% in 2019 and a further 2.0% in 2020, and retail construction is forecast to fall by 4.0% this year and be flat next year.

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In contrast, the harbours sector is expected to grow by 12% in 2019 and 10% in 2020, the CPA says. If there are major issues around Brexit, warehousing will be another sector that benefits from increased activity due to demand for storage and stockpiling facilities. Following growth of 20% in 2018, construction activity in this sector is forecast to rise a further 10% in 2019 and 2020.

Noble Francis, economics director at the Construction Products Association, said: “Fortunes for construction depend greatly on which sector firms are operating in.

“Our latest construction forecasts are conditional on either a revised Brexit withdrawal being agreed with the EU and getting through UK parliament or a delay to Article 50. However, even if this occurs, the uncertainty surrounding Brexit is clearly affecting the construction industry in areas that require high investment up front for a long term rate of return such as commercial offices, which is expected to fall by 20% in 2019 on the back of sharp falls in new orders in 2017 and 2018. The construction of prime residential apartments and industrial factories is also being affected greatly by the high and rising Brexit uncertainty.

“However, whilst this uncertainty adversely affects some construction sectors, it provides a boost to others. The warehouses and harbours are relatively small sub-sectors but both are growing rapidly and are expected to enjoy double-digit growth this year as the demand rises for storage and trading facilities.

“Infrastructure is still expected to be the main driver of construction activity in both 2019 and 2020. The forecast growth in infrastructure is due to main work on major projects such as Hinkley Point C, the first new nuclear power station in over 20 years. However, government inability to deliver major projects to time and budget remains a major concern, highlighted most recently by the stalling of work on the second of the new nuclear power stations Wylfa Newydd and the cancellation of Moorside, the third new nuclear power station. If the government can improve its delivery of major infrastructure projects, then construction output could outperform our forecasts in spite of Brexit uncertainty. However, it is a big ‘if’.”

MPU

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