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Revised construction forecast predicts 2.9% fall

Construction output is set to decline by 2.9 per cent, according to the latest forecasts from the Construction Products Association (CPA), although private housing and infrastructure offer some highlights

The CPA has upgraded its overall forecast from the previously predicted 5.2 per cent fall in construction output for 2012, to a decline of 2.9 per cent to reach £104 billion, reported sister title Construction News.

Output is then set to be flat in 2013, before returning to a 3.4 per cent growth in 2014.

New build output is forecast to fall by 3.5 per cent this year, with repairs and maintenance work holding up slightly better with a 1.6 per cent decline.

Private housing is forecast to grow by 3 per cent in 2012, with further rises of 6 per cent and 8 per cent in the following two years. But at £14.4 billion, the value of output forecast during this year is still 31 per cent below the 2007 peak.

CPA senior economist Kelly Forrest said the slight upgrade to the private housing forecast, from 2 per cent in the winter publication, was due to the economy stabilising in the first quarter of this year.

‘The Eurozone was still weighing heavily on sentiment, but signs have been encouraging,’ Forrest said, adding that there will be some positive impact from the Get Britain Building and NewBuy initiatives.

Infrastructure remains one of the star sectors, with the CPA forecasting an average growth of 6 per cent per year through to 2016, fuelled mainly by rail and nuclear work, with rail construction set to grow by 56 per cent in the next four years.

But public sector construction work is predicted to contract by 18 per cent between 2011 and 2014, with education falling by one third by 2014 from its 2010 peak.

Prospects for the commercial sector remain uncertain, with forecast declines of 2.2 per cent and 1.5 per cent for this year and next. The CPA highlights retail as the ‘bright spot in an otherwise gloomy horizon’ but the forecast said: ‘Growth in this sub-sector will be insufficient to compensate for reductions elsewhere.’

The CPA predicts that 2014 is the year that private developers will have restored confidence in investing, with commercial output edging up by 1 per cent, before stronger growth of more than 4 per cent the following two years. The CPA says private sector construction is forecast to rise by just over one-fifth by 2016.

CPA chief executive Michael Ankers said: ‘Public sector spending cuts are now beginning to bite and with the exception of a steady recovery in the private housing market, where starts are forecast to increase by 5 per cent this year and 11 per cent next, the private sector is pretty subdued.

‘What is particularly disappointing is the weakness of the private commercial market where output is expected to decline both this year and in 2013. Office development is slowing down and private finance for social infrastructure is unlikely to make a rapid comeback.’

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