CPA forecasts gradual recovery in construction

Association forecasts slow construction recovery after difficult 2005.

The last 12 months have been difficult for the construction industry with output estimated to have fallen by over 1%, ending 11 years of uninterrupted growth.

However, the Construction Products Association is forecasting a gradual recovery in construction activity during 2006 driven by a turn around in government investment.

Commenting on the forecasts, Construction Products Association Chief Executive, Michael Ankers, said: "In 2005 the construction industry was hit by higher energy and raw material costs, weaker private sector activity and a fall of around 3% in government investment in the built environment".

"In 2006, however, we expect to see a modest 1% pick-up in overall construction output, largely due to a recovery in public sector investment".

"'Private sector investment continues to remain weak".

"Below trend UK economic growth and an uncertain global economy are expected to remain constraints on business investment over the coming year, while poor consumer confidence and a sluggish housing market mean that 10,000 fewer private sector homes are likely to be built this year".

"At the same time, the home improvement market will remain depressed".

"'Looking further ahead, we expect to see more substantial growth in construction output during 2007 and 2008, at around 3% per annum, as higher UK economic growth lifts private sector activity and Government presses on with the delivery of its investment plans during the current Spending Review." Other key points in the Association's forecasts are:.

* Home improvement expenditure is expected to continue to fall this year, with private housing repair, maintenance and improvement output dropping 1%, before recovering by 3% per annum during 2007 and 2008 as consumer confidence returns.

* Whilst a sustained recovery in office development activity is forecast for the next three years, investment in retail and entertainment premises is expected to weaken.

* Increased investment in regional distributional facilities is set to lift industrial building work during 2006.

* Higher Government investment in education and health is forecast to increase both public nonhousing activity and the flow of PFI projects over the forecast period.

* A rise in social housing investment is set to both raise new public housing starts from 20,000 homes last year to 26,000 in 2008 and support a sustained increase in public housing RMandI activity over the next three years.

* Delivery of the Highways Agency's current investment programme is expected to heighten road construction activity after three years of decline, with output rising by 8% this year and 10% in 2007.

* A sustained rise in water and sewerage construction output is expected over the forecast period as water companies implement their new investment programmes agreed with OFWAT.

* Olympics related work is expected to make a contribution to industry output from 2008.

To purchase the full report, visit http://www.constprod.org.uk/pages/pubs.asp.

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