Volume drops as capital cuts bite deep

The value of UK construction output in 1998 is expected to exceed the boom year of 1990 by 5%, according to the latest forecasts from Hewes & Associates. However, the total volume of construction in terms of output in 1998 is predicted to drop 10% below last year's figure.

The forecasts outlined in the latest issue of Construction Outlook show that the value of UK construction rose by close to 14% over the past two years. But, with the exception of 1994, the volume of output has fallen every year since 1990.

The difference between construction volume and value measures of output is accounted for by price movements. Construction output prices fell between 1990 and 1993, but have since risen by over 10% and are presently above 1990 levels. Further, more modest price rises are expected over the next few years.

Overall construction output is expected to fall by 1.3% this year, rise by 0.5% in 1997, before dropping by 0.3% in 1998. Despite the advent of PFI and National Lottery funded projects feeding through in 1997, the picture given is that Government borrowing will continue to exceed expectations, resulting in further cuts in public capital programmes.

The volume of new work is expected to fall over the next few years with public housing, public non-housing and infrastructure being the worst hit.

The outlook for private housing is seen as being uncertain, but is expected to improve in line with earnings growth and further price rises in 1997.

Industrial construction is expected to continue to grow into 1997, followed by a moderate fall in the volume of work.

Commercial construction actually fell last year, although the volume of orders has been rising since late 1992. Output is expected to increase over the next two years.