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CPA revises forecasts upwards for 2017 and beyond

The Construction Products Association has revised down its forecast for 2016 by 0.2 percentage points but retained a bullish outlook for 2017 and beyond in its latest projections.

The organisation has revised its 2016 output growth forecast to 3.6 per cent, down from the 3.8 per cent it predicted in November.

However, forecasts for 2017 and onwards have all been revised upwards, helped by a significant increase in infrastructure work. Output is expected to grow by 4.1 per cent in 2017, up from November’s prediction of 3.7 per cent, while in 2018 output will increase 4.2 per cent, up from 3.7 per cent in the previous forecasts.

Infrastructure will be the fastest growing sector from 2016 onwards, with output increasing by 10.1 per cent in 2017 followed by growth of 15.9 and 14 per cent in 2017 and 2018 respectively.

Figures for 2017, 2018 and 2019 have all been revised upwards by 0.1 ppts, 2.4 ppts and 2.5 ppts respectively, with the CPA expecting work at Hinkley Point C to get under way in 2018. Overall, infrastructure activity is forecast to grow by 59.6 per cent by 2019.

Private housing is expected to see stable growth of 5 per cent in both 2016 and 2017, with the CPA forecasting nearly 141,500 starts this year. Starts are projected to hit around 151,500 in 2018.

However economics director Noble Francis said the public housing sector would continue to perform poorly. “Housing associations will be adversely affected by a lack of funding as rental income will be hit by the extension of Right to Buy and cuts to social rent,” he said.

“Public housing starts are expected to fall a further 5 per cent in 2016 and no significant growth is expected over the forecast period.”

Elsewhere, the industrial sector will perform strongly, with output forecast to rise 21.3 per cent by 2019.

Office construction will continue to be the main driver of commercial activity, with output set to increase by 7 per cent in both 2016 and 2017. Prof Francis said this was due to “a flurry of high-profile developments in London, Birmingham and Manchester”.

“Retail construction on the other hand is expected to remain flat in 2016 and only rise 2 per cent in 2017,” he added.

Prof Francis also highlighted three major risks around the forecasts: China’s weakness, the EU referendum and skills shortages. “The chief concern remains weakness in China and the effect it can have on other countries,” he said.

“Second is the EU referendum, likely due this year. While we make no assumption about the result, we note the uncertainty around the issue is already affecting investment decisions.

“Third and perhaps of most importance for the industry is the urgent challenge around skills shortages. The availability and cost of skilled labour has clearly impacted the housebuilding sector; the recovery in other sectors is already showing a similar vulnerability.”

In January, Experian revised its forecasts for 2016 down to 2.6 per cent, after a slowdown activity in the latter half of 2015.

 

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