CPA warns of double dip for construction

The UK construction industry is heading for a double dip recession, according to the latest Construction Products Association’s industry forecasts.

CPA warns of double dip for construction

Despite a temporary recovery in the first half of 2010, the industry is predicted to be the first major industry sector to fall back into recession. Forecasts show output will fall in the remaining months of 2010 and that the decline will continue into the first part of 2011.

Although, private housing output is expected to double between 2009 and 2014, this growth is from the nadir of 2009 when house building fell to its lowest level since 1924.

In 2010, only 96,000 housing starts are anticipated with 8% growth expected in 2011 and despite double-digit growth in the three years afterwards, housing starts in 2014 will still be considerably below the level estimated to be needed to meet population growth.

The commercial sector, worth £23 billion, is expected to fall a further 10% in 2010, compounding the 23% fall in 2009. However, a return to growth next year could help to offset falls in public sector investment.

Infrastructure construction is expected to grow almost 50% over the forecast period, benefitting particularly from the considerable investment in rail infrastructure and energy provision.

Yet the severity of the public sector spending cuts and weak consumer confidence are such that they are expected to cause a ‘double-dip’ recession in the construction industry. The improvement in output

during the first half of 2010 is not expected to be maintained, with output in the second half of 2010 and the first half of 2011 falling once again.

A sustained recovery for construction is expected to be delayed until 2012 and growth will only return to the long term trend rate in 2013, following a recovery in economic growth.

Michael Ankers, Chief Executive of the Construction Products Association described positive growth figures as “deceptive”.

He said: “The factors that drove this growth – the short term impact of the last government’s fiscal stimulus; a tentative recovery in the housing market; and the start of a number of major projects in the run up to the Election – are not the basis for a long-term recovery.

“Although 2010 as a whole is likely to be slightly better than 2009, it is very much a year of two halves with construction output slipping back in the second half of the year as a result of growing uncertainty in the housing market and cuts in public spending.

“Looking forward, the industry needs to see strong private sector growth to offset the significant reduction in public investment that we anticipate over the next few years, but as the latest information on new orders for construction work published on Friday shows, recovery in orders for private sector work go nowhere near what is needed to offset the anticipated 18% fall in public sector construction work over the next two years.”

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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