UK construction decline to continue

The UK construction sector will continue to contract for the next two years, with no significant signs of recovery expected until 2014, according to the latest forecast from the Construction Products Association.

Output for this year is expected to fall -0,5%, followed by a further drop of -2,8% in 2012. In 2013, output will be broadly flat with just +0,2% per cent growth, while a healthier growth figure of +3,4% is forecast for 2014.

The number of public construction projects is falling, and the private sector is not filling the gap, according to Association economics director Noble Francis.

"The government has indentified construction as a key driver to help boost economic recovery and for private sector work to replace public sector. Unfortunately, although the public work is now beginning to decline and will fall by -24% by 2014, there is little evidence that the private sector work will replace this over the next couple of years."

Exports rise

However, the Association said construction product manufacturers were receiving some respite in the form of increased exports. It said 33% of manufacturers of light construction products and 23% of manufacturers of heavy products had reported increased sales to overseas markets during the second quarter, and both groups expected sales to rise over the next year.

Nevertheless, 71% of UK construction product manufacturers expressed concern that domestic demand could constrain activity this year, particularly as the price of fuel, energy and raw materials continues to rise.

"Although manufacturers are currently benefiting from a favourable exchange rate, there is great concern within the industry that this will be outweighed by the continual impact of rapidly rising costs," CPA senior economist Kelly Forrest said.