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Output at risk of first decline since 2012

Construction industry output will decline this year for the first time since 2012, according to the latest forecast from the Construction Products Association.

Output for the whole of 2018 will be 0.6 per cent lower than in 2017, which will be the first year-on-year decline since 2012.

Sharp falls in the commercial sector, particularly the office and retail markets, are expected to drag down overall industry output.

The CPA also estimates that only 60 per cent of the £1bn in output lost due to Carillion’s collapse and bad weather in Q1 will be recovered over the rest of the year.

Strong growth in the infrastructure and residential sectors is expected to save the industry from a steeper decline in 2018.

However, CPA economics director Noble Francis said questions remained over the delivery of several major infrastructure projects.

“This growth is highly dependent on large projects such as HS2 and Hinkley Point C,” Prof Francis said.

“But, as ever, there remain concerns about government’s ability to deliver infrastructure projects without the cost overruns and delays that we have seen on Crossrail and HS2 recently.”

The CPA’s forecast cited further potential falls in output if Brexit talks were to stall or collapse.

“[Brexit uncertainty] badly affects demand in sectors such as prime residential in London, commercial offices towers and industrial factories, which is dependent on manufacturing,” Prof Francis added.

Output in the office market is forecast to fall 20 per cent in 2018, while output in the retail sector is expected to drop 10 per cent.

Last week Hammerson announced that its planned £1.4bn works at Brent Cross shopping centre, one of the largest retail projects in the UK, would be postponed until after 2019.

Prospects for commercial construction were more positive for some cities, including Birmingham, Manchester and Leeds.

However, the CPA noted that an expected slowdown in London will drag down output nationwide, due to the capital accounting for the majority of commercial activity. 

If the infrastructure pipeline delivers projects to site as expected, then the forecast said output in the sector would grow by 3.2 per cent this year and 13 per cent in 2019, when main works on HS2 are scheduled to begin.

CPA forecasts for total construction industry output are more positive for 2019 and 2020, with growth of 2.3 per cent and 1.9 per cent respectively.

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