Double-digit growth forecast for this year but risks remain

As the trade association and training body for the safety netting and temporary safety systems industry, FASET keeps up to date with the latest news within the construction industry – particularly regarding COVID, Brexit and sustainability. We are pleased to share the following story on the continued but cautious growth of the construction sector.

The Construction Products Association (CPA) has published its Spring Forecast following a national lockdown that left the construction industry relatively unaffected. However, it looks certain that it will be 2022 before output returns to pre-COVID 2019 levels.

The CPA forecast is not quite as optimistic as it was three months ago, with construction output now forecast to rise by 12.9% in 2021 and 5.2% in 2022 – compared with 14.0% in 2021 and 4.9% in 2022 in the CPA’s previous forecast.

But this downward revision is only because 2020 turned out not have been as bad as expected, with official data reporting a fall of 12.5% in 2020 compared to 2019. The new forecast for 2021 thus reflects a higher base for construction output in 2020.

While the UK economy faltered in the first quarter of 2021 due to the impacts of the third national lockdown, construction activity accelerated, although some parts fared better than others.

Infrastructure was least affected by the initial lockdown as it was easier to adopt safe site operating procedures and other safety measures on large sites. In 2021, infrastructure output is forecast to increase by 29.3%, reaching its highest level on record. This will be driven by activity on major projects such as HS2, despite the announcement of further delays and cost overruns, as well as activity on long-term frameworks in regulated sectors such as water, roads, electricity and broadband.

Extensions to the stamp duty holiday, Help to Buy and job support schemes are expected to help sustain demand in private house-building and private housing repair, maintenance and improvement work (RM&I). Private housing, the worst-affected construction sector in the initial lockdown, is expected to continue its strong recovery in 2021, the CPA says, with the chancellor’s mortgage guarantee scheme likely to stimulate demand in the general housing market. Coupled with expectations of rising house prices during the year, new housing starts are forecast to gather pace in 2022.

CPA economics director Noble Francis said: “Whilst outlook is largely positive, the recovery in commercial – the third-largest construction sector – is expected to be muted given a lack of major investment in new projects, particularly in central London. Questions remain over future demand of commercial space, particularly in offices and retail, which may be converted into residential or warehousing and logistics, if homeworking and online spending persists in the long-term.

“More notably, however, there are significant risks to the recovery in the form of supply constraints in terms of extended lead times and sharp rises in costs for vital imported products such as paints and varnishes, timber, roofing materials, copper, steel and polymers. This may hinder the ability of construction activity to increase in line with our forecast. Furthermore, concerns remain whether the high levels of demand for housing new build and RM&I can be maintained after the government stimulus and policy measures end on 30th September, particularly the furloughing and self-employment income schemes and stamp duty holiday.”

Image: geograph.org.uk

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