The Construction
Products Association has joined other industry surveys in downgrading the
outlook for constriction in 2019.
It is the third time
in six months that the CPA has revised its forecast, reducing its predictions
of a 2.3 per cent increase in output to just 0.3 per cent growth now.
The CPA has also
revised last year’s expected output figure from flat growth of 0.1% down to a
contraction of 0.2%, ending the industry’s long run of annual growth in
activity.
Civil engineers are
best placed to ride out the uncertainty with strong growth forecast for
infrastructure which will hit its highest output level on record this year. But
even here there is some concerns about long-term workloads after the
cancellation of two major nuclear power stations.
But major building
contractors face even worsening outlooks as Brexit uncertainty continues to
drive expectations for the sharpest construction decline in the commercial
sector, particularly felt in the offices sub-sector.
Investors have
signalled the uncertainty is too high to justify significant up-front
investment, and output is expected to fall 20% this year.
Conversely,
Brexit-related preparations are helping harbours workloads which are expected
to grow by 12% in 2019 and 10% in 2020, and could be higher if works on
improvements and expansions of ports need to be carried out.
If there are major
issues around Brexit, warehousing will be another sector that benefits from
increased activity due to demand for storage and stockpiling facilities.
Following growth of 20% in 2018, construction activity in this sector is
forecast to rise a further 10% in 2019 and 2020.
Noble Francis,
Economics Director at the Construction Products Association, said: “Fortunes
for construction depend greatly on which sector firms are operating in.
“Our latest
construction forecasts are conditional on either a revised Brexit Withdrawal
being agreed with the EU and getting through UK Parliament or a delay to
Article 50.
“However, even if
this occurs, the uncertainty surrounding Brexit is clearly affecting the
construction industry in areas that require high investment up front for a long
term rate of return such as commercial offices.
“The construction of
prime residential apartments and industrial factories is also being affected
greatly by the high and rising Brexit uncertainty.
“Infrastructure is
still expected to be the main driver of construction activity in both 2019 and
2020.
“The forecast growth
in infrastructure is due to main work on major projects such as Hinkley Point
C, the first new nuclear power station in over 20 years. However, government
inability to deliver major projects to time and budget remains a major concern,
highlighted most recently by the stalling of work on the second of the new
nuclear power stations Wylfa Newydd and the cancellation of Moorside, the third
new nuclear power station.
“If the government
can improve its delivery of major infrastructure projects, then construction
output could outperform our forecasts in spite of Brexit uncertainty. However,
it is a big ‘if’.”
The CPA Winter 2019
forecast states:
• Construction
output to rise by 0.3% in 2019 and 1.6% in 2020
• Private housing
starts to rise 2.0% in 2019 and 1.0% in 2020
• Offices
construction to decline 20.0% in 2019 and 2.0% in 2020
• Retail
construction to fall 4.0% in 2019 and remain flat (0.0%) in 2020
• Infrastructure
work to rise by 8.8% in 2019 and 7.7% in 2020
