Construction to Grow by 23% by 2018

Evertaut News

7 Nov, 2014

According to the Construction Products Association autumn forecast, construction will grow by 23% by the end of 2018.

Output will grow 4.8% in 2014 and 5.3% in 2015, the study said, and contribute £12bn to the UK economy.

The biggest growth sector is energy infrastructure, which is anticipated to grow 118.2% by 2018.

Roads construction will rise 46.1% over the next four years. Private housing starts are expected to grow 18% in 2014 and 10% in 2015. The private commercial sector is set to increase 3.7% in 2014 and 6.1% in 2015.

Dr Noble Francis, economics director of the CPA, said: “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.

But he warned: “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.”

Francis warned of capacity concerns in the housing sector, “particularly from SME house builders”, and said there were “serious questions about affordability and higher mortgage repayment costs”.

He predicted strong growth in the commercial and offices sectors. “Commercial is expected to benefit from a pick-up in consumer spending and business investment and drive growth in each year up to 2018. Output in the sector is forecast to reach £26.8bn 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 10% in 2014 and 8% in 2015, followed by 7% 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 8% from 2015.”

Francis expects infrastructure output to be strong, rising 2% a year, on average, over the next four years.

Roads construction is forecast to increase by 10% in 2014 and a further 5% in 2015 due to growth in the Highways Agency’s capital funded he said.

Rail output is forecast to rise 8% in 2014 and 2015, but from 2016, growth is anticipated to slow, reflecting uncertainty regarding funding.

Francis said public sector construction had severely hindered overall construction recovery, after several years of austerity, with modest growth forecast. “In 2013/14, we saw the nadir of capital investment falls and consequent rises in funding for schools and hospitals are expected to lead to public sector construction growth averaging 2.6% per year between 2015 and 2018,” he said.