No construction recovery until 2011

Construction workload will not recover from recession until 2011 and contractors will have to wait a further decade before workload returns to the 2007 peak.

That is the grim outlook say economists at the Construction Products Association who have grown more pessimistic about the strength of the recovery in 2011 and 2012.

CPA forecast for construction output

Infrastructure spending on rail, water and energy is likely to be the only bright spot in coming years, reaching £10bn by 2013. On the other hand industrial spending will have slumped 60% between the peak and 2010, while new office building will have halved.

Despite some encouraging signs that the wider economy may be rising out of recession and some signs of the beginning of a housing market recovery, the association forecasts that construction output will slump a record 15% this year and a further 2% in 2010.

Then even with trend growth in the years after 2011, it would take until 2021 for construction output to return to the 2007 peak.

Michael Ankers, chief executive of the Construction Products Association said: “There are signs that the private housing market is beginning to pick up although the recovery is expected to be slow and from historically very low levels.

Even with this new optimism the total number of houses expected to be built in the two years 2009 and 2010 will only equal the number built in the year before the credit crunch.

“Government spending on construction projects in the short term remains strong and without this the industry would be in a far worse position.

He warned: "We remain very concerned that any significant cut-backs in capital spending after the Election will prolong the downturn as it will be some time before we expect to see significant growth in private sector commercial projects.

“One bright spot for the industry is government spending on infrastructure, which we see remaining strong throughout our five year forecast period, with commitments to the rail network, a new five year programme for investment in water and, towards the end of the period in particular, the start of major investments in new energy supply.

Key points

• Private housing starts will grow steadily throughout the forecast period, reaching 148,000 in 2013
• Commercial new work is falling very sharply and by 2010 is expected to be less than half the size it was just two years earlier
• Construction of factories and warehouses is expected to fall almost 60% between 2007 and 2010.
• Public investment in schools and hospitals remains strong in 2009 and 2010, but is anticipated to fall sharply in the following years
• The infrastructure sector is expected to grow significantly throughout the forecast period, reaching an estimated £10 billion in 2013