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CPA cuts growth forecast after Q3 slowdown

24 November 2015

As expected, the Construction Products Association has downgraded its growth forecast for 2015 and 2016, following a third quarter that saw a noticeable slowdown in construction activity.

But the CPA believes that the Q3 output figures from the ONS were a temporary phenomenon, linked to the recalibration of projects to higher prices and a tight labour pool, and that output will recover for the rest of the year and into 2016.

The CPA is now forecasting construction output of 3.6% and 3.8% in 2015 and 2016 respectively, revised down from 4.9% and 4.2% in the summer forecast. 

Overall, it says construction output is expected to rise by 19.7% between 2015 and 2019, driven by growth in the private housing, commercial and infrastructure sectors.

In bad news for housing supply, the latest CPA forecast predicts that private housing starts will rise 7% in 2015 and just 5% in 2016, while public housing starts are expected to fall 10% in 2015 and 5% in 2016.

"We remain positive about prospects for the construction industry. The slowdown in Q3 activity is expected to be temporary and construction output is expected to rise by 19.7% between 2015 and 2019."

Dr Noble Francis, CPA

But infrastructure is a strong performer, with output forecast to rise 13.2% in 2015 and 7.6% in 2016.

Dr Noble Francis, the CPA’s economics director, commented: “We remain positive about prospects for the construction industry. The slowdown in Q3 activity is expected to be temporary and construction output is expected to rise by 19.7% between 2015 and 2019. 

“Private housing starts are forecast to rise, with major house builders signalling their intention to build more homes over the next 12-18 months. 

“Help to Buy accounts for one quarter of new build purchases and will help to sustain demand. House prices continue to increase in most regions, especially in London and the south east, illustrating a strong underlying demand. 

“Public housing, however, is expected to be adversely affected by uncertainty and a lack of funding due to the extension of Right to Buy to housing associations and cuts to social rent.”

In the infrastructure sector, supported by the £411bn National Infrastructure Plan, the roads and energy sub-sectors will be strongest, but work is expected to increase throughout the forecast period in all key sub-sectors – roads, energy, rail, water and sewerage. 

The CPA also points to future growth in the commercial sector, averaging 3.9% per year through to 2019, driven by the construction of new offices and regional cities such as Birmingham and Manchester, as well as London.

Retail construction is expected to improve, but this will be held in check by the curtailment of expansion plans by major supermarket chains.

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