The construction
industry is bracing itself as the demise of Carillion and falls in public
housing repair work, despite urgent work needed post-Grenfell, are expected to
hit the industry in 2018.
Growth is expected
to remain flat – at best – according to the Construction Products Association’s
forecasts.
Infrastructure
remains the main bright spot for UK construction where any growth in
construction at all will be reliant on government’s delivery of infrastructure
projects. If realised this would result in a 6.3% rise in infrastructure work
in 2018.
However, concerns
for the industry escalated following Carillion’s liquidation as the firm
accounted for £850 million of the sector’s projects.
The length of hiatus
on Carillion sites will play a critical role on growth, and it is too early to
tell what impact this will have on the 25,000-30,000 firms in their supply
chain.
Following the tragic
Grenfell Tower fire in June last year, 160 social housing towers were deemed
unsafe and in need of urgent work. However, the sector is suffering from a lack
of finance available to local authorities and concerns on the capacity to deliver
the work. The public housing repair, maintenance and improvement sector has
fallen 20% since 2010, and despite the urgency following the Grenfell Tower
fire output is expected to fall by a further 2% in 2018.
The sharpest decline
for construction in 2018 will be in the commercial sector, and particularly
felt in the offices sub-sector as a lack of clarity on the UK’s post-Brexit
deal led to a sharp fall in contract awards.
Offices construction
is expected to decline 15% in 2018 and 10% in 2019, with further concern this
will accelerate if firms choose to move operations out of the UK into other EU
member states.
Noble Francis,
Economics Director at the Construction Products Association said: “Recent
construction output and Markit/CIPS data have already highlighted subdued
activity in the construction industry and our latest forecasts suggest that
2018 is likely to be tough for the industry.
"Overall, we
are forecasting construction output to remain broadly flat this year but this
is before the full impacts of the liquidation of Carillion in January feed
through the supply chain and government will need to take a key role in
mitigating the effects as it has already done on the services part of
Carillion.
“Infrastructure
activity is still expected to grow by 6.3% this year if politicians are able to
deliver on their many announcements of major projects and spending across
roads, rail and energy. Government will also need to help councils with funding
to address issues on social housing towers above 18 metres since the Grenfell
tragedy. Output in public housing repair, maintenance and improvement has
already fallen each month since the tragedy and, without assistance, will fall
2% this year.
“Output in the
commercial sector, the second largest construction sector, is expected to fall
during 2018, primarily driven by a fall in demand for new office space,
particularly within London. We expect offices construction to fall 15% this
year as Brexit uncertainty means that international investors hold back on
major new investment in high-profile space in the capital.”
