According to the latest Construction Products Association forecasts, construction output will increase 5.5 percent in 2015; however, growth is expected to slow in the following two years due to the effects of election uncertainty.
Due to growth in the three key sectors of construction, private housing, commercial, and infrastructure, construction output is expected to increase 5.5 percent in 2015, which is more than double the rate of growth for the UK economy.
The general housing market has slowed, but house building continues to drive construction industry growth. Following a 13.3 percent increase in 2014, private house building is expected to increase by 10.0 percent in 2015, to 142,000 new homes.
Commercial construction, worth £22 billion per year, is expected to rise 6.4 percent in 2015 as a result of work on major towers in London as well as large office projects in Birmingham and Manchester.
However, the UK’s most uncertain election in more than 40 years is expected to have a negative impact on construction output over the next two years. Because of the time lag between construction contracts and work on the ground, construction activity in 2015 is unlikely to be impacted, as the majority of work for the year has already been planned.
Instead, the CPA anticipates a pause in private and public investment for future projects this year, resulting in slower construction growth of 4.0 percent in 2016 and 3.4 percent in 2017.
“Although fewer homes are being built than we need each year,” said Dr Noble Francis, economics director, “private house building growth is forecast to slow to 5.0 percent in 2016 and 3.0 percent in 2017.” Again, this is primarily due to government policy uncertainty, such as Help to Buy, which has otherwise stimulated house building in the last two years. This means that, despite a five-year recovery projected to 2017, private house building will be 19.2 percent lower than at the pre-recession 2007 peak.
“Similarly, increases in commercial activity are likely to be hampered this year by a pause in business investment due to the election, with growth in the sector expected to slow to 5.2 percent in 2016 and 4.4 percent in 2017.”
“One area that is expected to be largely unaffected by the election is infrastructure activity, which is expected to rise throughout the forecast period to 2018.” Because of the £466 billion pipeline of work under the National Infrastructure Plan, strong growth of 7.6 percent this year is expected to accelerate to 9.2 percent in 2016 and 10.6 percent in 2017. Large projects include the £1.5 billion A14 redevelopment, the £4.2 billion Thames Tideway Tunnel, and, eventually, the £16 billion Hinkley Point C nuclear power station.”
“Overall,” Dr Francis concluded, “the Construction Products Association forecasts that construction output will exceed the pre-recession peak next year, with output in 2018 expected to be 17.9 percent higher than in 2014.” However, for this to happen, industry will need to collaborate with the new government to address the need for increased investment in capacity and skills.”