The spring 2017 forecast Construction Products Association (CPA) has construction output growing by 1.3% in 2017, 1.2% in 2018 and 2.3% in 2019.
The new forecast is substantially more bullish than the February 2017 outlook, which forecast construction output growth of 0.8% in 2017, 0.7% in 2018 and 2.2% in 2019.
Infrastructure projects are expected to be the industry’s main growth engine, driven by a strong National Infrastructure and Construction Pipeline valued at £300bn over the next four years.
Major projects in the energy, rail and water sub-sectors will create a 34.5% increase in infrastructure activity, the CPA says, offsetting expected falls in commercial and industrial construction.
House-building is also expected to continue to be a key source of growth, with private house-building starts rising by 7.2% between 2017 and 2019, underpinned by a continued upward trend in house prices, demand from first-time buyers and Help to Buy equity loans.
CPA economics director Noble Francis said: “Construction output has been sustained post-referendum, primarily due to projects signed up to before June 2016. Activity is expected to remain strong in the first half of this year in all the key construction sectors: private housing, commercial, industrial and infrastructure. Looking further forward, a fall in contract awards during the second half of last year is likely to impact greatest where Brexit uncertainty affects sectors requiring high investment up front for a long term rate of return, such as commercial offices and industrial factories.
“We forecast that output in commercial offices will fall 1.0% this year and a further 12.0% in 2018. Industrial factories construction is expected to fall 5.0% in 2017 and 4.0% in 2018. However, this is expected to be offset by strong growth in infrastructure and private housing. Infrastructure construction is expected to increase by 7.3% in 2017 and 11.1% in 2018, primarily driven by major projects such as main works at Hinkley Point C and High-Speed 2. Private housing starts are forecast to rise 3.0% in 2017 and 2.0% in both 2018 and 2019.
“Looking forward, given the dependence of construction industry growth on activity in the infrastructure and private housing sectors, it is essential that government focuses on delivery of infrastructure projects in its National Infrastructure and Construction Pipeline. In addition, as major house builders are reliant upon Help to Buy equity loans, which are due to end in 2021, it is vital that government outlines its plans early to support house building growth as we approach the end of the scheme.”