Construction activity is set to grow 18% by 2017

The Construction Products Association’s latest forecasts highlight that the industry recovery is becoming stronger and broader. Rapid increases in private house building, together with growth in the infrastructure and commercial sectors, will drive activity.

Key highlights include:

• Construction output is expected to rise by 4.5% in 2014 and by a further 4.8% in 2015;

• Private housing starts are set to rise 18.0% in 2014 and 10.0% in 2015;

• Commercial offices construction is expected to increase 7.0% in 2014 and 10.0% in 2015;

• Infrastructure activity is set to rise 10.1% in 2014 and 7.2% in 2015.

Dr Noble Francis, Economics Director of the Association, commented: “One year since the construction recovery began, activity is becoming firmly entrenched. We forecast 4.5% growth in 2014 and a further rise of 4.8% in 2015. The construction industry is now on track to grow 18% by 2017 and contribute an additional £20 billion to the UK economy.

“We expect private housing starts to surge 18.0% in 2014 and 10.0% next year before falling to 5.0% in 2016 and 2017. The government’s Budget 2014 extension of the Help to Buy scheme, in addition to a strengthening UK economy, will lend the necessary confidence to house builders to boost supply.

“We hasten to add, however, that housing starts are only half the number needed to meet the number of households created. As a consequence, when this inadequate supply is combined with excess demand and general expectations of house price inflation, we expect the key issue facing the sector in the medium-term will be affordability. “The recovery in the housing market has also benefitted the private housing repair, maintenance and improvement sub-sector,” Dr Francis continued.

“However, the lack of Green Deal and ECO-related work has been a considerable constraint. Given the £20 billion market potential for improving the energy efficiency of the existing UK housing stock, the forecast of only 3.5% growth in 2014 and a further 4.0% in 2015 will disappoint many industry observers.

“It’s important to note that private house building only accounts for 15% of total construction. Commercial, the largest sector, is expected to grow each year up to 2017. The offices sub-sector in particular has recently shown growth, though demand is mostly in Central London. We forecast offices construction to increase 7.0% in 2014 and 10.0% in 2015.

“We expect last year’s gains in the infrastructure sector to continue to 2017 when levels are anticipated to be 42.0% higher than in 2012. Recently, rail has been the fastest growing infrastructure sub-sector and the near-term growth in activity will be led by Crossrail and the Thameslink Programme. Another strong sub-sector is roads, which fell almost 50.0% in only two years but is forecast to grow every year to 2017 including 15.0% in 2014.”

Dr Francis concluded: “The main risks to our forecasts arise around the issue of energy. Construction and manufacturing firms have serious concerns regarding energy security and supply. Constant delays to the nuclear programme and uncertainty regarding investment in gas-fired power stations only exacerbate these concerns. As a consequence, we continue to highlight the need for government to deliver on its numerous announcements of project investments and ensure these feed through into activity on the ground.”

0