THE Construction Products Association (CPA) has published its summer forecasts, which reveal a ‘slight downgrade’ in the UK construction sector’s near-term growth prospects.
Output is forecast to fall by 2.9% this year, steeper than the 2.2% contraction forecast three months ago. The organisation said this is primarily due to recovery in the two largest construction sectors, private housing new build and repair, maintenance and improvement (rm&i), being pushed back until the Bank of England begins cutting interest rate cuts and consumer confidence strengthens.
The CPA added that increasing concerns about the potential impact of uncertainty around responsibilities throughout the supply chain from the Building Safety Act may also delay the delivery of some larger, high-rise projects.
The sector’s recovery is now forecast to be in 2025, with growth of 2% and a further rise of 3.6% in 2026.
Despite the overall construction decline forecast for 2024, the outlook for sectors outside of housing remains similar to three months ago, with many firms operating in commercial refurbishment and fit-out or working on major infrastructure projects continuing to experience ‘robust’ activity.
Rebecca Larkin, CPA head of construction research, said, “As the two largest sectors of construction account for over one-third of total output, the fortunes of private housing new build and repair, maintenance and improvement heavily influence overall construction performance. Activity in both has been held back by interest rates remaining at peak for longer than previously expected, which is delaying the recovery in housing market demand, new build sales and improvements spending that typically occurs after a house purchase.
“Interest rate cuts and a pickup in sentiment are expected to start in the second half of this year but, realistically, it will take until 2025 for the recovery to be felt more strongly.
“Off the back of the election there have been clear signs of intent from the new government, particularly around potential changes to planning policy to improve housing and infrastructure delivery. However, with little detail at this stage, it is difficult to see any near-term uplift, whilst long-running concerns over skills shortages and the loss of construction workers, which has worsened dramatically in recent years, present the biggest risk to longer-term growth.”
