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Recovery ‘will be sharper than thought’

The Construction Products Association has revised up its forecasts for industry performance on the back of increasing signs of recovery in the commercial sector.

In its spring forecast, the CPA reduced its forecast for the level of industry contraction in 2010 to 2.7 per cent.
This is up from a decline of 3.1 per cent predicted in its winter forecast, released in January.

More strikingly, it said the construction industry would grow by 1.2 per cent in 2011, by another 1 per cent in 2012 and by a further 1.1 per cent in 2013.

This is up from previous estimates of 0.5, 0.4 and 0.2 per cent growth respectively. The commercial sector - the
industry’s largest before the recession - is forecast to suffer even more than previously thought this year, but to then recover more quickly.

The latest CPA forecast says commercial activity will fall by 19 per cent in 2010, compared to its previous prediction of 15.1 per cent. But it now expects the commercial sector to grow by 4.2 per cent in 2011, having previously forecast a 1.1 per cent fall.

A 9.3 per cent rise is now expected in 2012, rather than a 4.3 per cent increase. The Association said the amount
of newly completed commercial space coming to the market in 2010 would fall to a historic low.

It added that in recent months there had been a realisation among occupiers that availability would be limited post-2010.

Rents have also started to increase and are forecast to rise by around 15 per cent in 2010, beginning to wipe out some of their 35 per cent fall during the downturn.

CPA economics director Noble Francis said: “We are slightly more upbeat about private sector recovery, and slightly more pessimistic about the public sector.

“But because the private sector is a bigger proportion of the total construction output, it means a rise overall.”

But he added: “It all very much depends on what sector you are in at the moment.”

Infrastructure and private housing are the other sectors leading the charge towards a recovery.

Private housing starts have been rising consistently since the historic lows experienced during the first quarter of 2009, and are anticipated to hit 97,000 in 2010. They are then expected to rise by 16 per cent and 14 per cent in
2011 and 2012 respectively.

The next five years are anticipated to see a 42 per cent rise in infrastructure output with growth driven, in the main, by a rise in construction work within the regulated sectors of rail, electricity and water.

Highways work should also increase, with the infrastructure sector expected to be worth more than £11 billion by 2014.