UK construction growth downgraded
The outlook for the UK’s construction industry has been downgraded, with growth prospects diverging by sector and Brexit-related uncertainty intensifying, according to the Construction Products Association’s latest forecasts.
Uncertainty around the UK’s withdrawal from the EU has persisted since the previous forecasts and estimates for growth are now weaker than before.
Six months ago, the 2019 construction output was forecast to rise by 2.3%. However, the CPA’s winter forecasts now anticipate activity to rise by only 0.3%.
Private housing and infrastructure sectors remain the primary drivers of industry growth in the coming years. The confirmed extension of the government’s Help to Buy scheme through to March 2023 continues to encourage housebuilding activity, with output forecast to rise 2% in 2019 and 1% in 2020.
The infrastructure sector is expected to reach its highest level on record in 2019 driven by large projects such as HS2, Thames Tideway and Hinkley Point C.
There remain concerns, however, about government’s ability to deliver major infrastructure projects, as highlighted by the cost overruns and delays seen most recently on Crossrail, and suspension of the second new power station, Wylfa. Infrastructure growth is forecast to rise by 8.8% in 2019 and 7.7% in 2020.
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% in 2019.
However, Brexit-related uncertainties can help drive growth in other sub-sectors. The harbours sector is 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.