The latest forecasts from the Construction Products Association have been upgraded owing to more positivity over the private sector and the general strengthening of the economy.
The Construction Products Association forecasts output to grow by 4.5 per cent in 2014, an upgrade from the 3.4 per cent previously forecast in the winter.
Construction output is then expected to increase by 4.8 per cent in 2015, before slowing slightly to 4.3 per cent in 2016.
New work is set to see significant growth this year of 5.5 per cent and then 6 per cent next year, while repair and maintenance output will see growth of more than 2 per cent annually from 2014 to 2016.
“The growth remains private housing and infrastructure-led, but is supported by the commercial sector,” says the association’s economics director Noble Francis. “There is more broad-based growth forecast than last year.”
Housing starts grow stronger
Dr Francis says the main changes to the forecasts from the winter are within private housing starts and energy.
Private housing starts are now forecast to rise by 18 per cent this year – slightly higher than the 16 per cent forecast in the winter.
“We have had to assume that whoever is in power will carry on with Help to Buy, as none of the other parties have explicitly come out and said they will stop it”
Noble Francis, Construction Products Association
Next year will see growth of 10 per cent, while the following two years will see a slowing to 5 per cent growth each, which Dr Francis attributes to uncertainty following the general election in 2015.
“We have had to assume that whoever is in power will carry on with Help to Buy, as none of the other parties have explicitly come out and said they will stop it,” he says.
Public housing upgraded
Expectations for public housing starts growth have also been upgraded to 8 per cent in 2014 and 5 per cent in 2015, owing to the growth in private markets leading to an increase in social provision via section 106 agreements.
Private housing repair and maintenance is expected to grow on the back of an increase in property transactions, but the sector is being held back.
“What is constraining housing repair and maintenance is government policy – in particular the Energy Companies Obligation,” Dr Francis says.
“If the increase is repair and maintenance was driven only by property transactions, you would see double-digit growth.”
The infrastructure sector’s forecast output growth for this year has been upgraded to 10.1 per cent from the 6.8 per cent forecast in the winter, but expectations for the following three years have been downgraded, with the association now anticipating 7.2 per cent growth in 2015, down from 9.5 per cent.
Within infrastructure, energy is forecast to grow by 15 per cent this year and 5 per cent in 2015, a switch from the winter’s forecast growth of 4 per cent and 15 per cent respectively.
Dr Francis says an increase in orders and decommissioning works have contributed to the upgrade for 2014.
However, he cites the ongoing investigations into Hinkley Point C and the big six energy firms, by the European Commission and Ofgem respectively, as potential hindrances to investment into new energy.
“We now assume Hinkley main works output to fall into the back end of 2015, but primarily into 2016 onwards,” he says
The forecasts do not account for Wylfa power station in Anglesey, with main works not expected to start before 2017.
However, the electricity sub-sector is still forecast to grow by 39 per cent by the end of 2017.