Construction sector facing three-year decline

CONSTRUCTION output is expected to decline by 7% during the next three years, before a return to growth in 2011 at the earliest, according to the latest industry forecasts from the Construction Products Association (CPA). Yet, despite this recovery, housing starts in 2012 are expected to remain below their 2007 levels.

So far the economic slowdown and volatility in the financial markets has had the greatest impact on the private housing market, which during both this year and next will see the fewest number of housing starts for 60 years.

However, the CPA says this turmoil is now undermining other parts of the industry. This year has seen a dramatic fall in the construction of industrial buildings and the future prospects for commercial development are also looking exceedingly poor.

This decline follows 13 years of unprecedented growth, which saw output across the industry increase by 32% from 1994 to 2007, but output is now expected to fall by 2% in 2008 and almost 5% in 2009.

In contrast, public sector investment has continued to increase, supported by the capital programmes announced by the Government in last year’s Comprehensive Spending Review.

The immediate future for investment in education, health facilities and transport infrastructure continues to be positive, says the CPA, but with public finances now very weak, coupled with lower tax revenues from the economic slowdown, the position after 2010 is expected to worsen.

Michael Ankers, chief executive of the Construction Products Association, said the latest forecasts were, without doubt, the ‘gloomiest’ the Association has produced since it began compiling this information. He added that the forecasts had been downgraded from just three months ago to show the sharpest downturn since 1991.

‘Prospects for the industry over the next few years are very precarious, therefore it is critically important that the Government maintains its spending plans in order to deliver the much-needed investment in our schools, hospitals, infrastructure and other public sector investment,’ he said.

‘With shrinkage already being experienced in privately funded new work, the industry is certainly in for a bumpy ride as output falls to levels last seen in 2002. Turnaround is now expected in 2011 at the earliest, although the housing starts per year will continue at an historic low until 2012.’