Sector growth predictions downgraded

Growth predictions have been downgraded for the UK’s construction sector in 2019, amid concerns around Brexit uncertainty and ongoing delays in the delivery of major infrastructure projects.

The Construction Products Association’s (CPA) Autumn Forecasts anticipate growth will remain flat in 2018, and only rise by 0.6 per cent in 2019, a downward revision from its previous estimate of 2.3 per cent.

Despite a ‘weakened’ market, private housing continues to be a key growth sector for the construction industry, with first-time buyer demand enabled by the Help to Buy scheme. Over the last 12 months, equity loans accounted for almost one-third of all housebuilding sales, in particular sustaining demand for housebuilding in the north and midlands, thereby offsetting falls in London and the South East. The sector’s output is forecast to rise 5 per cent in 2018, and 2 per cent in 2019.

The infrastructure sector also remains a primary driver of growth for the whole construction industry, with output forecast to hit a historic high of £23bn by 2020, driven by large projects such as HS2 and Hinkley Point C. However, concerns remain about the Government’s ability to deliver major infrastructure projects without the cost overruns and delays seen recently on Crossrail. Caution surrounds the forecast, and growth in the sector has been revised down to 8.7 per cent in 2019, from its previous forecast of 13 per cent.

Brexit uncertainty continues to drive expectations of the sharpest construction decline in the commercial sector, particularly expected to be felt in the offices subset. Investors have reportedly signalled the uncertainty is too high to justify significant up-front investment in new floor space for a long-term rate of return, and output is expected to fall 10 per cent in 2018 and a further 20 per cent in 2019.