Construction industry set to grow by 23%

cpaThe construction industry will grow 23% by the end of 2018 and contribute £12 billion to the UK economy over the next two years alone, according to the latest Construction Products Association (CPA) Autumn Forecasts.

Key highlights include:
•Construction output will grow 4.8% in 2014 and 5.3% in 2015;
•Private housing starts are expected to grow 18% in 2014 and ten per cent in 2015;
•The private commercial sector is set to increase 3.7% in 2014 and 6.1% in 2015;
•Roads construction will rise 46.1% by 2018
•Energy infrastructure is anticipated to grow 118.2% by 2018.

Dr Noble Francis, economics director of CPA, said: “Our forecasts reflect a welcome, recurring theme as growth continues and begins to broaden. Short-term activity is still led by private housing, infrastructure and commercial, and areas of public sector construction are showing the first signs of increasing strength. We believe the expansion will continue through 2018.

“Recovery is not a foregone conclusion, however, and several important risks remain, primarily around the strength of the UK and Eurozone economies, the policy outcomes following the 2015 General Election and the impact of any supply constraints such as the scarcity of labour and materials.

“The private housing sector’s rapid growth since early 2013 has been sustained by consistent levels of demand, the general UK economy’s return to health and government policies such as Help to Buy. We forecast starts to rise 18% in 2014 and ten per cent in 2015. In order for such projections to be met, however, increased capacity is necessary, particularly from small to medium business house builders. In addition, there remain serious questions about affordability and higher mortgage repayment costs, together with uncertainty around the future of housing policies given the pending election. With this in mind, we forecast private housing growth will moderate in the longer term to five per cent per year from 2016.

“Commercial, the largest sector, is expected to benefit from a pickup in consumer spending and business investment and drive growth in each year up to 2018. Output in the sector is forecast to reach £26.8 billion in 2018, but this remains 16.6% lower than the pre-recession peak in 2008.

“Offices is one sub-sector of commercial where demand is intensifying in regions beyond London and the south east. Given this, the Association expects new offices construction will expand by ten per cent in 2014 and eight per cent in 2015, followed by seven per cent in 2016.

“Other commercial sub-sectors also show signs of strength. The retail sub-sector remains exposed to the long-term trend away from the high street to internet shopping, and previous peak output levels are unlikely before 2018, but new, large developments should still support growth of eight per cent from 2015.

“Infrastructure output is forecast to rise by 8.2% per year, on average, over the next four years. Roads construction is forecast to increase by ten per cent in 2014 and a further five per cent in 2015 due to growth in the Highways Agency’s capital funding. Rail output is forecast to rise eight per cent in 2014 and 2015, but from 2016, growth is anticipated to slow, reflecting uncertainty regarding funding.

“Finally, austerity in the previous three years has meant that public sector construction has severely hindered overall construction recovery. In 2

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