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Construction slowdown but no recession, says CPA

The Construction Products Association has predicted a construction output slowdown but allays fears that it will lead to a recession.

The CPA has forecasted that construction output will grow by just over 1 per cent compared to 2.6 per cent enjoyed in 2007, but expects to avoid recession, even though this rate of growth is expected to remain at a modest 1 per cent per annum up until 2012.

Chief executive Michael Ankers said that while the economic backdrop is 'more uncertain than for many years' that the fall in private housing – both new build and repair and maintenance – over the next couple of years, balanced by continued growth in the commercial sector on the back of major schemes that are already underway.

"The industry will also be supported by increasing government investment in its schools’ programme, a modest recovery in spending on infrastructure projects and the start of the major projects associated with the Olympic Games and the Stratford City Development. As a result, construction output is expected to grow by about 1 per cent in both 2008 and 2009."

Mr Ankers qualified that these forecasts were based on assumptions that the Bank of England will continue to lower interest rates throughout 2008.

Mr Ankers said: "Failure to do so will undoubtedly delay any recovery in the housing market.

"The forecasts also rely on government remaining committed to its investment plans for education and health and whilst significant reductions in these programmes seem unlikely in the run up to the next Election, what happens after that will to some extent depend on the strength of the government’s finances."

Key elements of the forecast are:

  • Housing starts are expected to fall to 205,000 in 2008, but recover to 235,000 by 2012

  • Output on commercial projects is expected to reach a peak in 2009 with output of £17.3bn, but fall back to £15.5bn by 2012

  • Output on infrastructure projects which has declined sharply over the last decade is expected to recover strongly over the next five years with output increasing by over 25 per cent from just under £5bn in 2007 to more than £6.5bn in 2012.

  • The repair and maintenance market is expected to remain subdued throughout the forecast period, with some recovery in the private sector after 2010, offset by falls in programme of repair and improvement for the social housing stock.

  • Output on public sector projects is expected to grow by 2.8 per cent pa over the next five years, more than double the rate of growth in the private sector which is forecast to grow at just 0.3 per cent pa