Flat Year Predicted For UK Construction Output

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Flat Year Predicted For UK Construction Output

Despite the need to build more homes and the range of big infrastructure projects on the cards for the coming months and years, output within the UK’s construction industry is expected to flatline this year.

However, it’s not all bad news, with the sector predicted to return to growth in 2019, according to the latest research from the Construction Products Association (CPA).

The CPA’s figures show that output in the industry is expected to be considerably lower for the first quarter of 2018, compared to the final three months of 2017.

Noble Francis, economics director at the CPA, explained that a number of factors have dented the construction sector’s performance in the early part of this year.

“Carillon, the UK’s second biggest contractor, went into liquidation in January and led to a hiatus on infrastructure and commercial projects. The snowy weather badly affected work on site for at least three working days in February and March,” he said.

As a result, the output for the first three months of this year is “likely to be £1.5 billion lower than in 2017 Q4”, Mr Francis concluded.

The CIPS/IHS Markit UK Construction Purchasing Managers’ Index took a hit in March, with the organisation blaming the poor weather for the drop to 47.0. This is the first time in six months that the index has dropped below 50.0, which indicates no change. In February it was at 51.4.

Group director at CIPS Duncan Brock explained that the snow had an impact across many elements of the construction sector. “The unseasonal weather restricted overall activity, lengthened delivery times and triggered the fastest drop in new orders since July 2016,” he said.

Despite the less than ideal start to 2018 for much of the construction sector, the industry is set to recover quickly, posting estimated growth of 2.7 per cent in 2019 and 1.9 per cent in 2020, the CPA is predicting.

Naturally, some areas of the construction industry are performing better than others – infrastructure and private housing were singled out as the areas where output is expected to grow this year.

Infrastructure in particular is set to see good growth, with output up by 6.4 per cent this year and by an impressive 13.1 per cent in 2019, largely as a result of the start of work on large civil engineering projects such as HS2, Hinkley Point C and the Thames Tideway Tunnel.

Mr Francis commented: “The growth in infrastructure and private housing building this year is forecast to offset falls in the hard hit commercial sector.”

In fact, the CPA revealed that office construction in the UK is expected to fall by 20 per cent this year, and by a further ten per cent in 2019. PFI health projects have been hit by Carillon’s collapse, and this in turn means the PFI health sub-sector is likely to see output fall by five per cent this year as well.

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