The UK’s
construction industry is expected to experience a moderate fall in 2018,
following five years of consecutive growth.
The Construction
Products Association’s Summer Forecasts anticipate growth for the whole of 2018
to fall 0.6%, before accelerating to 2.3% in 2019 and 1.9% in 2020, with house
builders the primary drivers of growth for the whole industry.
In private housing,
first-time buyer demand, enabled by the government’s Help to Buy scheme,
continues to boost sentiment and encourage an increase in housebuilding
activity outside London. The sector’s output is forecast to rise 5% in 2018 and
2% in 2019.
The infrastructure
sector also remains a primary driver of growth for the whole construction
industry, with output forecast to hit a historic high of £23.6 billion by 2020,
driven by large projects such as HS2 and Hinkley Point C. However, the sector
will be hoping government will push to ensure delivery on the ground with work
on both projects already significantly delayed.
Without the forecast
growth in infrastructure and private housing activity, total construction
output would fall by 3% in 2018 and remain flat in 2019.
The demise of
Carillion resulted in a poor performance for the industry at the start of the
year, which combined with the bad weather, lost UK construction £1 billion of
work. It is estimated 60% of this work may be recovered, but Carillion’s
collapse will cause further delays at two major hospitals as work on the £335
million Royal Liverpool University and Birmingham’s £350 million Midland
Metropolitan hospitals is on hold until at least 2019.
Brexit uncertainty
continues to drive the sharpest decline for construction in the commercial
sector, particularly felt in the offices sub-sector which is expected to fall
20% in 2018 and a further 10% in 2019. Meanwhile, the shift to online shopping
is causing woes for the high street, with new retail construction expected to
fall by 10% this year.
Noble Francis,
Economics Director at the Construction Products Association said: "Clearly
the first quarter of the year was difficult for the industry due to the demise
of Carillion and the bad weather. Things improved markedly in the second
quarter due to a catch-up in work as we would have expected but, overall, it’s
mixed fortunes for contractors at the moment. On the positive side, house
builders are keen on accelerating building rates outside of London and that is
expected to be enough to offset sharp falls in house building in the capital.
"Firms working
on major infrastructure projects also have a lot of work in the pipeline.
Infrastructure output is forecast to rise by 3% in 2018 and 13% in 2019. This
growth is highly dependent on large projects such as HS2 and Hinkley Point C,
the first of the new nuclear power stations but, as ever, there remain concerns
about government’s ability to deliver infrastructure projects without the cost
overruns and delays that we have seen on Crossrail and HS2 recently.
"On the
negative side, the elephant in the room is clearly Brexit uncertainty, which
has had a big effect on international investment, especially where it is high
up-front investment for a long-term rate of return, which is now highly
uncertain. It badly affects demand in sectors such as prime residential in
London, commercial offices towers and industrial factories, which is dependent
on manufacturing.
"Overall in
construction, there is forecast to be a slight fall in activity, of -0.6%, in
2018 after five consecutive years. However, in 2019, we are anticipating of
growth of 2.3% due to house building and infrastructure."
