The CPA is forecasting that output will fall by just under 1% in 2011 and by a further 2% in 2012 as recovery in private sector construction fails to match the sharp downturn in public sector spending.
This puts the industry firmly into a douple dip recession, as many suspected. The recovery in 2010 followed the sharpest downturn in more than a generation.
The CPA’s latest forecast predicts that construction output will fall 0.8% in 2011 and 2% in 2012 before rising 0.5% in 2013, 2.3% in 2014 and 3.9% in 2015.
Construction output in 2012 is expected to be 3% lower than the pre-recession peak in 2007.
It forecasts that by 2015 public sector construction work will fall £11bn, with a 53% reduction in education sector spend on construction and a 27% reduction in the health sector.
However, private sector construction work is set to grow £15bn by 2015 with spending on both rail and energy doubling, and commercial office and retail expected to rise 14.
However, even after five years of consecutive growth, private housing starts in 2015 are still expected to be 16% lower than in the pre-recession peak of 2007.
CPA chief executive Michael Ankers said: “It is especially worrying that the construction industry is going to face another two years of falls in output, particularly given it is an industry that has been identified in the government’s Growth Plan as having a key part to play in the economic recovery. Significant cuts in public spending are inevitable whilst the private sector remains cautious about the pace of the wider economic recovery and consumer confidence remains at low levels.
“We welcome the steps that the government is taking to stimulate private sector growth but we do not see these in the short term as being sufficient to outweigh the public sector cuts. Availability of finance remains an issue for many companies and the housing market is still being held back by the lack of finance available, particularly for first time buyers. Accounting as it does for nearly 10% of GDP, the industry undoubtedly does have a key role to play in rebalancing the economy and leading the economic recovery.”
The CPA proposes a plan of action for the government, saying that it needs to:
- Continue to pressure mortgage lenders to make finance available for house purchases and ensure that the range of initiatives introduced in the recent budget actually work
- Make sure that planning authorities around the country adhere to the requirement to make a presumption in favour of sustainable development
- Ensure that the localism agenda acts as a stimulus for growth in local communities and does not create a ‘nimby’s charter’
- Try to accelerate the programme for investment in energy supply so that companies have an increased confidence about investing in the UK
- Introduce incentives to encourage householders to invest in the energy efficiency of their homes in advance of the Green Deal policy being introduced at the end of next year.
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