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Private housing causes upgrade to construction output forecasts

The latest upgrades from the Construction Products Association show housing continuing to drive recovery, but questions remain over the sector’s future once government initiatives wind down.

The latest forecast update from the Construction Products Association offers further evidence of a tentative recovery for the industry.

Construction output is now expected to decline by just 0.5 per cent compared with the 1.5 per cent fall predicted in the summer, with whispers that we could potentially see a flat rate of growth by the year end.

This is forecast to be followed by growth of 2.7 per cent in 2014 and 4.6 per cent in 2015, compared with previous predictions of 2.2 and 4.5 per cent respectively.

Over the forecast period to 2017, the industry is looking at an average annual growth rate of 3.4 per cent.

Unsurprisingly, private housing remains the main driver. Significant growth in starts is still expected for the next few years, but this is now expected to be even more focused on 2013 and 2014, with a slowing over the rest of the forecast period.

Private housing starts surge early

Private housing starts are forecast to increase by 19 per cent this year and 15 per cent next year, fuelled by the huge uptake of the Help to Buy initiative.

Over the forecast period, starts are set to rise by 11 per cent a year on average, up from the 9 per cent predicted in the summer forecasts.

“We could quite easily argue that 2013’s growth could be higher,” says the association’s economics director Noble Francis. “Help To Buy seems to have given housebuilders confidence, and they will take advantage while [the initiative] is still there.

“We could quite easily argue that 2013’s growth could be higher”

Noble Francis, Construction Products Association

“The question is what will happen when the government policies finish. We have two assumptions: either the policies will be dropped or the government will keep them going or put in place a similar replacement.

“Either way we are unlikely to continue to see the growth rates we currently have.”

Rail growth set to slow

The infrastructure sub-sectors meanwhile are all forecast for comparatively strong growth against others across the industry.

Double-digit growth is expected in roads output in 2014 and 2015, but Dr Francis says “you can take that any way you want to, as this is coming from a low point” – referring to the 43.8 per cent decline the sub-sector recorded in 2012, which followed a 10.6 per cent drop in 2011.

“Even if our forecasts went to 2020, HS2 would not be included”

Noble Francis, Construction Products Association

The significant growth seen in rail, on the other hand, is expected to slow over the forecast period, with the association predicting flat levels in 2017 due to reservations over funding for the next wave of plans from Network Rail (CP5) as well as the peaking of activity on Crossrail.

The association has not factored in High Speed 2 within its assumptions. “Even if our forecasts went to 2020, it would not be included,” Dr Francis says.

Output growth widely expected

The average of the latest forecast updates from the association, Leading Edge and Experian show a decline of 1.5 per cent for this year, before a 2.3 per cent improvement in 2014 and 3.7 per cent growth in 2015.

Output forecasts Oct 13 various

The Construction Products Association is the most optimistic of these forecasters, but its predictions were compiled after the release of August output figures by the Office for National Statistics, which revealed growth of 4 per cent – a third consecutive year-on-year rise.

It is therefore likely that we shall see some further uplift from other commentators as more data and evidence emerges over the remainder of 2013.

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