Construction to grow despite potential supply issues, says CPA

The Construction Products Association’s (CPA) latest quarterly forecast suggests that output in the industry will grow by a robust 4.3% in 2022, slowing to 2.5% in 2023 compared to the 13.3% seen in 2021.

Breakdown

Infrastructure will be the major driver for this growth while housebuilding is expected to remain buoyant, with projects already underway in all sectors giving great confidence for the forecast figures.

Meanwhile, output in private housing is forecast to rise by 3.0% in both 2022 and 2023, following 17.0% growth in 2021. The CPA suggests that the double-digit inflation in house prices will fall as the impact of the end of the stamp duty holiday and the further restriction of the Help to Buy scheme feeds through. The outlook for volume remains positive, with most major house builders reporting strong near-term demand and healthy profit margins fuelled by demand for housing in affordable areas of the UK.

Regarding RMI, the CPA forecasts output to remain flat at the historically high level reached with 17.0% growth last year. Rising renovation project costs and higher inflation rates are expected to slow down consumer spending on larger projects. UK households have benefited from building up over £200 billion of savings from the past two years but rising costs are spelling caution for spending compared to 2021.

Supply issues

The ongoing product supply issues have eased recently, but may still cause problems, particularly in the peak spring period and particularly for smaller building companies.

The CPA still considers this to be the biggest challenge to overall growth, with questions over sufficient materials, products, labour, HGV drivers and imports at the forefront of industry minds. However, these challenges are not spread equally across the sector, with smaller specialist sub-contractors feeling the pressure more.

Commenting on the supply chain issues, Noble Francis, CPA economics director, said: “Major house builders and main contractors are less affected as they have better visibility of medium-term demand and can plan and purchase well in advance; plus, they are the larger customers of the manufacturers, builders’ merchants and importers.

“Smaller firms, however, have found that availability issues have delayed projects and, consequently, revenue streams whilst sharp cost increases have hit margin, harming their viability even though they have strong workloads. Overall, the latest indications are that supply issues have eased recently, which is a positive sign, although it is still early in the year and before industry activity tends to ramp up in the Spring.”

>>Read more coverage from the CPA here.