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Carillion and snowstorms drive output down £1.5bn in Q1

Carillion’s collapse and bad weather in February and March contributed to a £1.5bn quarterly decline in output during Q1, according to the Construction Products Association.

The organisation’s assessment forms part of its latest forecasts of 2018 activity, with output growth expected to be broadly flat for the year.

Output lost during February and March is expected to be recovered in subsequent quarters to produce overall growth of 0.1 per cent during 2018.

CPA economics director Noble Francis said: “The start of the year was a bad one for construction. Carillion’s liquidation […] 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 and, as a result, Q1 2018 construction is likely to be £1.5bn lower than in Q4 2017.

“Fortunes for the industry overall will depend on the extent to which construction activity catches up during the rest of the year.”

PMI data for March suggested the bad weather had caused activity to fall to a 20-month low.

Output during the rest of 2018 is forecast to be mixed across the sectors, with growth in infrastructure and private housing helping offset declines in commercial and public sector work.

Infrastructure is expected to be the strongest-performing sector with growth of 6.4 per cent in 2018, helped by major projects including HS2, Tideway and Hinkley Point C.

However, the CPA raised concerns regarding the pipeline of major projects.

Prof Francis said: “Large infrastructure projects should also allow for a catch-up after the adverse weather and often have penalty clauses for delays.

“Despite the sector’s strong growth prospects, questions remain about poor government delivery of major infrastructure projects.”

Private housing is expected to report another strong year in 2018, with output forecast to grow 5 per cent as Help to Buy continues to underpin demand.

Other areas are forecast to struggle, however, with the commercial sector – the second biggest after private housing – expected to contract 7.8 per cent in 2018.

Office construction is predicted to fall 20 per cent in 2018 as the drop in new orders following the EU referendum starts to translate into lower output.

Retail developments meanwhile are expected to decline by 10 per cent in 2018 amid the shift from high street to online retail.

Public sector non-housing output, which was the only area of new work to decline in 2017 with a 3.6 per cent fall, is expected to fall a further 4.8 per cent in 2018 as constraints on public funding continue.

Prospects for the construction industry in 2019 and 2020 are brighter, however, with the CPA forecasting output growth of 2.7 and 1.9 per cent respectively.

Infrastructure is expected to be see the highest growth over this period.

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