CPA says predicted growth comes with risks


CPAThe latest forecast from the Construction Products Association (CPA) estimates 3.6% growth for the construction industry in 2016 but also says that risks have intensified.

The forecast is a downward revision from the Autumn 2015 forecast of 3.8%, which the CPA says is primarily because of slower UK economic growth, but a further 4.1% growth in 2017.

The CPA forecasts private housing starts to rise 5% and offices construction to rise 7% in both 2016 and 2017. By 2019 industrial activity and infrastructure work are expected to increase by 21.3% and 56.9% respectively.

Professor Noble Francis, economics director for the CPA, said: “The key fundamentals for the sector are generally positive and construction growth is set to be more balanced. Private housing work, especially in London and the South East, provided the majority of growth between 2012 and 2015.

“Private housing starts are forecast to rise, buoyed by a high latent demand for home ownership, which is enabled through rising mortgage lending and policies from Government. The demand-side policies in particular will fuel house price inflation further, especially in the capital, whilst also incentivising major house-builders to increase building rates over the next 12-18 months.

“In addition, given all the Government assistance to boost the housing market, house-builders are likely to be under pressure to increase supply throughout parliament.”

Thus, the forecast horizon does remain positive, however, risks that threaten construction activity have intensified, particularly from weakening global economic growth, the EU referendum and skills shortages.

Professor Francis continued: “The significant risks to this forecast are firstly, the uncertainty regarding global economic prospects. The chief concern remains weakness in China and the effect it can have on other countries.

“Second is the EU Referendum, likely due this year. While we make no assumption about the result, we note the uncertainty around the issue is already affecting investment decisions.

“Third and perhaps of most importance for the industry is the urgent challenge around skills shortages. The availability and cost of skilled labour has clearly impacted the house-building sector; the recovery in other sectors is already showing a similar vulnerability.”

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