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CPA downgrades construction forecasts as growth stalled until 2014

Construction output is set for a 5.8 per cent decline over 2012 and 2013, according to the latest forecasts from the Construction Products Association.

The CPA’s main summer forecast shows output is set to crash by 4.5 per cent this year, to a value of £102.5 billion, with a fall of 1.3 per cent forecast next year.

The industry will now not see growth until 2014, according to the forecasts, with output value set to be below pre-recessionary levels even by 2016.

“Recovery will basically happen now in late 2013 to early 2014,” said Dr Francis. “It’s a similar sort of story to before, but just a bit worse.”

He attributed the growth in 2014 to a rise in output across the infrastructure, commercial and private housebuilding sectors, alongside an easing in the sharp falls in public sector output already evident this year.

The figures are a downgrade from the association’s spring update, which forecast a fall of 2.9 per cent this year, before a flat 2013. The CPA said the latest forecast decline is due to the cuts in the capital budget not being made up by a recovery in the private sector.

The commercial sector is forecast to fall by 2.8 per cent both this year and next, as the hoped-for private sector recovery to offset the sharp falls in public sector output has not materialised.

Office output will decline by 2 per cent this year, before recovery and increasing confidence will start recovery in 2013.

Retail, previously forecast to grow during 2012, has now been downgraded to a 3 per cent dip.

“There is now a dearth of high profile office space, but hopefully the eurozone crisis and international investment will become more certain. Once the risk has dissipated, we can start to see recovery,” said CPA economics director Noble Francis.

Public housing and non-housing work are both set to dip by at least 20 per cent this year, with the CPA forecasting a return to growth to come as late as 2015.

Infrastructure is forecast to fall by 1.4 per cent this year, largely due to spending in roads falling away, but investment in rail and energy will bolster the sector for growth next year and beyond.

Rail construction is predicted to rise by 55 per cent over the next three years, but delays in works at Hinkley Point C means that the CPA is forecasting a rise of 8 per cent in the electricity sector this year, lower than previously expected. Energy construction is still set to rise by 115 per cent by 2016.

Repairs and maintenance output is set for a 2.1 per cent fall in 2012, with Dr Francis saying that the forecasts are assuming the Green Deal not to have a huge impact, particularly for private housing, given the complexity and a lack of awareness among consumers.

“But the Green Deal may take effect in 2013 across public housing repairs and maintenance as housing associations may see a benefit,” he added.

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