Output will grow just 0.6% this year

Construction output will grow just 0.6% in real terms this year as public sector investment is delayed and the private sector remains subdued, according to the Construction Products Association’s latest forecast.

However, output is set to grow by 2.9% next year and by 2.8% in 2008, driven largely by the private sector.

The association’s chief executive Michael Ankers said: “The construction industry is recovering only slowly, having suffered its first fall in output in a decade during 2005 [down 1.1%]. Output is now forecast to grow at only 0.6% this year as the recovery in public spending remains very slow and private sector activity remains constrained by the slow-down in consumer spending.

“We expect to see more substantial growth in construction output during 2007 and 2008. The rising private sector activity is forecast to be increasingly the engine for growth.”

The forecast reveals some intriguing sector-by-sector detail. A sustained recovery in office development activity is expected to underpin commercial sector growth over the next three years, while increased investment in regional distribution centres will lift industrial building work this year.

Infrastructure will benefit from a sustained rise in water and sewerage output, together with major harbour projects and investment in electricity and the National Grid.

The Highways Agency’s current programme will lift road construction activity, rising 5% this year and 10% next year.

However, the decline in health-related output seen last year is expected to continue this year. The association expects future growth in this sector to be less than previously forecast.

Public housing repair, maintenance and improvement output will be flat this year with only modest growth in the following two years. The watering down of the Decent Homes timetable is “likely to hinder performance”.
Private RMI will drop this year, but then recover.