Uncertain to moderately optimistic

Recently revised data from AMA Research has indicated that total construction output increased by 8% in 2017 compared with 2016, to reach a total value of £163.5 billion.

New work accounted for the largest share, with output growth having been particularly strong in the residential new work segment, which saw growth of 14% in the year. RMI output has also been stronger in the residential than in the non-residential sector. Overall RMI output increased by 7% in 2017.

The construction sector remained uncertain to moderately optimistic in the first half of 2018, AMA Research said. Indications are that new orders remained positive into Q4 2017 and this should lead to some growth in terms of output into 2018 and beyond for certain key sub-sectors and, as a result, the outlook for the UK construction market remains mildly positive into the medium-term, although with lower rates of overall growth than previously forecast.

The outlook for the housing sector remains positive, if modest, with 17% overall growth in residential output currently forecast between 2017 and 2022. The imbalance between demand and supply for new housing will remain one of the key drivers for continued output growth for the residential sector, and the number of new programmes designed to address shortage in housing stocks should motivate output into the medium-term.

The non-residential sector is facing more subdued growth into the medium-term with output currently forecast to reduce to 1%-2% in 2018-19, followed by annual growth of around 3% to 2022. The issue of business confidence and investment levels, and the ‘wait and see’ approach regarding the commitment to future funding and capital commitments, are all likely to act as a brake on output levels into the medium-term.

Infrastructure will remain the largest sub-sector with growth underpinned by HS2 which has the potential to deliver £3-4 billion pa of output to 2022. However, the HS2 works also bring into question the issue of capacities both in terms of materials but also workforce which could result in skills shortages for other sub-sectors into the medium-term.

Jane Tarver of AMA Research said: “This more modest forecast takes into account the continuing uncertainty surrounding the Brexit process affecting the timing of business investment decisions.”