Construction industry set for record falls in output

The construction industry should brace itself for a record 12% fall in output this year - the worst drop on record - according to forecasts by the Construction Products Association (CPA), with significant positive growth not expected until 2012.

The forecasts released today (Monday) reveal the industry began 2009 with its steepest decline in output since 1980, and new orders since 1983.

Output is expected to fall further still in 2010, with a decrease of 3.4% predicted. The forecast period ends in 2013 with construction output still expected to be below levels experienced in 2002.

Noble Francis, economics director at the CPA, said: "The current economic recession is now having a major impact on our industry and this is the most serious downturn most of us in the industry have ever experienced. 

"We have already lost 60,000 jobs with more expected to follow and an estimated 12,000 construction workers on short time working."

So far, the worst affected sector has been private housing, Francis does not expect it to improve soon. The CPA anticipates new housing starts to fall to 70,000 this year, reaching a new low not seen since 1924. Public housing starts are expected to fall by 20% this year because of inherent ties with the private market.

The commercial sector is unlikely to fare well either according to the forecast with output expected to drop by 53% in the new build market over the next two years, and 40% in new retail construction.

Francis continued: "The government’s attempt to revive the financial sector, combined with various fiscal stimuli, has left public borrowing at unprecedented levels. Any upturn in construction will be critically dependent upon an increase in credit availability in the private sector.

"Positive growth is expected to be seen in publicly funded areas such as education, health and rail. However, with public borrowing reaching levels that are unsustainable, it is unlikely that public sector construction can grow in the medium term.

"Yet without delivering its public spending commitments, the government will miss its targets for housing, schools and hospitals. More importantly, this could turn the construction recession into a deep depression."

Other key aspects of these latest forecasts are:

• Factory construction to fall 28% and warehouse output falling 23% in 2009
• Government is expected to miss targets for public housing
• Education output is set to increase 34% over the next two years
• Rail output is expected to increase almost three fold by end of Forecast period in 2013