Construction to suffer election uncertainty until 2018, says CPA

Construction output is forecast to increase over 2015 but growth is expected to slow in the following years due to uncertainty surrounding the General Election, according to the Construction Products Association (CPA).

The latest Construction Industry Forecasts – covering the years up to 2018 – claims that output will go up this year by 5.5%, which is more than double the rate of growth in the UK economy overall. However, this is expected to slow during 2016 and 2017 as the new Government implements its policies.

The CPA believes May 7’s vote represents the most uncertain election in over 40 years and so any delays in the establishment of a new Government – which many feel is likely due to how closely the Labour and Conservative parties are polling – may hinder public and private investment. As a result, industry growth is expected to slow to 4.0% in 2016 and 3.4% in 2017.

Dr. Noble Francis, economics director for the CPA, said: “The lag between construction contracts and work on the ground means that construction activity in 2015 probably won’t be impacted, since the majority of work for the year has already been planned.

“Instead, we expect a break in private and public investment this year for future projects, which in turn will lead to slower construction growth.”

Despite its ongoing period of growth, house-building is expected to face the greatest reduction in output over the next few years. After rising 13.3% in 2014, private house building is forecast to increase a further 10.0% to 142,000 new homes in 2015 but then slow to 5% in 2016 and 3% in 2017. The CPA suggest that this will be due to uncertainty surrounding policies such as Help to Buy, which would be extended to 2020 under a Conservative Government but could end in 2017 if Labour were to form a majority.

This means that despite five years of recovery projected to 2017, private house building at that time is still forecast to be 19.2% lower than at the pre-recession 2007 peak.

Commercial construction is expected to face a similar fall, moving from a 6.4% increase in 2015 from the previous year to 5.2% in 2016 and 4.4% in 2017.

Infrastructure is the only one of the three main categories of construction that is expected to be largely unaffected by election uncertainty, and is forecast to actually increase throughout the period to 2018. Strong growth of 7.6% this year is expected to accelerate to 9.2% in 2016 and 10.6% in 2017 owing to the œ466 billion pipeline of work under the National Infrastructure Plan.

Despite these estimates, Dr. Francis added: “Overall the CPA forecasts construction output surpassing the pre-recession peak next year, and expect output in 2018 to be 17.9% higher than in 2014. For this to materialise, however, industry will need to work together with the new government to address the need for greater investment in capacity and skills.”

To view the CPA’s full forecast for the construction period up to 2018, click here

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