VIDEO: Gloomiest forecast yet rules out industry recovery before 2011
- Published: 02 October 2008 08:07
- Author: Nick Whitten
- More by this Author
- Last Updated: 02 October 2008 15:22
Construction industry output will drop almost seven per cent during 2008 and 2009, according to a forecast from the Construction Products Association – a major revision of its previous position.
It has now put back its predictions of a recovery for the industry until 2011 "at the earliest".
The latest forecast puts output at -1.8 per cent this year and -4.6 per cent in 2009, before a -0.3 per cent fall in 2010. The industry will only start to grow again – by 1.8 per cent – in 2011.
At 2000 prices this means output will be at £77.2 billion next year – down from £82.4 billion in 2007. Even by 2012, the industry will only be up to about £81 billion, according to the report.
The new pessimism is blamed on a steep fall-off in industrial and commercial work, as the effect of the economic downturn spreads beyond housing.
Industrial sector output is predicted to fall 22 per cent this year and a further 10 per cent next year.
The latest forecast is in contrast to its two forecasts in January and June, which put 2009 output at 1.2 per cent and -1.6 per cent respectively (see below).
Housing output is forecast to drop 24.1 per cent this year, -10.4 per cent in 2009 before rallying with 11 per cent growth in 2010.
However, the association predicts that housing starts will still be below last year's level by 2012.
Michael Ankers, chief executive of the Construction Products Association, said: "These forecasts are without doubt the gloomiest we have produced since compiling this information and have been downgraded from just three months ago to show the sharpest downturn since 1991.
"The prospects for the industry over the next few years are very precarious, therefore it is critically important the government maintains its spending plans in order to deliver the much needed investment in our schools, hospitals, infrastructure and other public sector investment.
"With shrinkage already being experienced in privately funded new work, the industry is certainly in for a bumpy ride as output falls to levels last seen in 2002.
"Turnaround is now expected in 2011 at the earliest although the housing starts per year will continue at an historic low until 2012."
According to the association the immediate future for investment in education, health facilities and transport infrastructure continues to be positive.
But with public finances now very weak, coupled with lower tax revenues and the economic slowdown, the position after 2010 and a likely general election is expected to worsen.
The latest Ernst and Young Construction Activity Barometer has also revealed activity in the industry over the past three months is at its lowest level since the barometer started four years ago.
Figures show things getting worse
The Construction Products Association's regular forecasts on industry output reflect the sharply deteriorating prospects for the industry in the past nine months.
In January the CPA forecasts were still optimistic after more than 13 years of industry output growth. It then predicted a five per cent output growth from £82.5 billion in 2007 to £86.5 billion in 2012.
The worst the picture got was a 1.1 per cent growth in 2008 with the following two years similarly subdued. A poor housing market this year was predicted to recover by 2009 and the industry as a whole would be buoyed by strong non-residential and infrastructure work.
But by June, a less rosy picture was being painted of a three per cent drop by the end of 2009 to £79.9 billion before a recovery in 2010/11, with strong growth again in 2012.
Now the latest figures make for sombre reading with forecasts showing a seven per cent decline over 2008 and 2009 then a slight recovery, but output in 2012 still well below that of 2007.
The decline of non-residential new work is stark. Last winter, the association forecast it would grow by 3.4 per cent in 2009. This had fallen to -1.7 per cent in summer's forecast and now stands at -6.9 per cent.
