After a weak start
to the year following the demise of Carillion in January and adverse weather
across the country in February and March, the Construction Products
Association’s Spring forecasts anticipate construction output growth for the
whole of 2018 will remain flat, before accelerating to 2.7% in 2019 and 1.9% in
2020.
Infrastructure and
private housing remain the two bright spots for UK construction activity.
Infrastructure
output is forecast to grow 6.4% this year and 13.1% in 2019 as main civil
engineering work commences on large projects such as HS2, the Thames Tideway
Tunnel and Hinkley Point C.
In private housing,
output is forecast to rise 5.0%, with demand for new build underpinned by the
support of Help to Buy through to March 2021.
This performance
contrasts with other sectors of the construction industry, however. The
sharpest decline is forecast in the commercial sector, where a post-EU
Referendum fall in contract awards for new offices space since the second half
of 2016 is expected to translate into a fall in activity this year. Offices
construction is expected to decline 20.0% in 2018 and 10.0% in 2019. The impact
of Carillion’s liquidation will be felt on commercial PFI health projects,
including the Midland Metropolitan Hospital and the Royal Liverpool Hospital,
where work has been paused to reassign or retender contracts. Output in the PFI
health sub-sector is forecast to fall 5.0% this year.
Noble Francis,
Economics Director at the Construction Products Association said: "The
start of the year was a bad one for construction. Carillion, the UK’s second
biggest contractor, went into liquidation in January and led to an hiatus on
infrastructure and commercial projects.
"The snowy
weather badly affected work on site for at least three working days in February
and March and, as a result, 2018 Q1 construction is likely to be £1.5 billion
lower than in 2017 Q4. Fortunes for the industry overall will depend on the
extent to which construction activity catches up during the rest of the year.
"Construction
activity is forecast to be flat this year and rise by 2.7% next year, primarily
driven by infrastructure and private house building. Half of the activity lost
in Q1 is expected to be regained during 2018. Work on some Carillion projects
has already restarted, on joint-ventures or where major clients such as Network
Rail have been keen to continue work. Other projects will take time to retender
but are still likely to restart this year. Large infrastructure projects should
also allow for a catch-up after the adverse weather and often have penalty
clauses for delays. Despite the sector’s strong growth prospects, questions
remain about poor government delivery of major infrastructure projects.
“Private housing
starts are expected to rise 2.0% in both 2018 and 2019 in spite of the slowdown
in the general housing market as Help to Buy is clearly sustaining demand for
new build homes. Outside London, house building will rise quicker than this but
growth overall will be constrained by the ongoing fall in demand for high-end
residential in the capital.
"The growth in
infrastructure and private house building this year is forecast to offset falls
in the hard hit commercial sector, where Brexit uncertainty continues to hit
international investment in new office towers in London and high street woes affects
the construction of new retail."
