From the organisers of the Natural Stone Show

 

 

 
Market Intelligence

Construction will grow 23% by 2018 – CPA forecast
, By Eric Bignell

The construction industry will grow 23% by the end of 2018, says the Construction Products Association (CPA) in its Autumn Forecast.

Key predictions include:

  • Construction output will grow 4.8% in 2014 and 5.3% in 2015
  • Private housing starts are expected to grow 18% in 2014 and 10% in 2015
  • The private commercial sector is set to increase 3.7% in 2014 and 6.1% in 2015
  • Roads construction will rise 46.1% by 2018
  • Energy infrastructure is anticipated to grow 118.2% by 2018.

Dr Noble Francis, Economics Director of the Association, comments: “Our forecasts reflect a welcome, recurring theme as growth continues and begins to broaden.

"Short-term activity is still led by private housing, infrastructure and commercial, and areas of public sector construction are showing the first signs of increasing strength.

"We believe the expansion will continue through to 2018."

He points out that recovery is not a foregone conclusion, the primary risks being the strength of the UK and Eurozone economies, policy outcomes following the 2015 General Election and the impact of any supply constraints such as the scarcity of labour and materials.

Dr Francis says the private housing sector’s rapid growth, which has brought benefits to many stone companies supplying building stone (as reported in the November issue of Natural Stone Specialist magazine), has been sustained by consistent levels of demand, growth in the UK economy and government policies such as Help to Buy.

The CPA forecasts that housing starts will have risen 18% this year with a further 10% growth next year, as long as shortages of labour and products (especially bricks) are overcome and interest rates and house prices do not rise too sharply. In anticipation of a gradual rise in interest rates over the next four years, it predicts growth will settle down to about 5% for 2017 and 2018.

It predicts that the commercial sector – the largest sector and the one that produces the stone industry's biggest projects – will benefit from a pickup in consumer spending and business investment and drive growth each year up to 2018. Output in the sector is forecast to reach £26.8billion in 2018, although this remains 16.6% below the 2008 pre-recession peak.

The demand for offices, a sub-sector of 'commercial', is intensifying in regions beyond London and the South East. Given this, the Association expects new office construction to grow by 10% in 2014, 8% in 2015 and 7% in 2016.

Dr Francis says: "Other commercial sub-sectors also show signs of strength. The retail sub-sector remains exposed to the long-term trend away from the high street to internet shopping and previous peak output levels are unlikely before 2018, but new, large developments should still support growth of 8% from 2015."

Infrastructure output is forecast to rise by 8.2% per year, on average, over the next four years, roads construction by 10% in 2014 and a further 5% in 2015 due to growth in the Highways Agency’s capital funding. Rail output is forecast to rise 8% in 2014 and 2015, although from 2016 growth is anticipated to slow, reflecting uncertainty regarding funding.

The energy sub-sector is forecast to grow 10% in 2015 before work on Round 3 Offshore Wind and Hinkley Point C leads to growth rates of 15% in 2016 and 2017 followed by 25% in 2018.

Hinkley Point C nuclear power station might get underway within 12-18months as the European Commission decided this month (October) that the Government paying the ‘strike price’ does not constitute state aid. However, the project has already seen many delays and more cannot be ruled out.

The CPA's final point is that austerity in the past three years has meant public sector construction has severely hindered overall construction recovery. But it believes 2013/14 has seen the highest level of capital investment cuts and that there will now be rises in public sector spending, led by schools and hospitals, of 2.6% on average up to 2018.

Dr Francis concluded: “The Association’s central forecast estimates that construction output will rise 4.8% in 2014, a marginal change from the previous 4.7% estimate. Output is forecast to rise a further 5.3% in 2015, an upward revision from 4.8% growth in the Association’s Summer Forecast due to the continued strength of the UK economy.”