Uncertainty over UK’s future relationship with the EU is negatively impacting construction activity with Brexit now just a few months away
The Construction Products Association (CPA) has downgraded industry growth prospects for 2019, citing the uncertain nature of Brexit planning and delays in the delivery of major infrastructure projects.
Based on the association’s latest Autumn Forecast report, growth in the sector is expected to be flat in 2018, while rising by 0.6 per cent next year.
The predicted growth in the sector for next year had initially been anticipated at 2.3 per cent, according to the association.
An ongoing lack of certainty on the final nature of the UK’s exit from the EU, still set for the end of March next year, was seen as a key factor in an anticipated sharp decline in activity within the commercial construction sector, specifically around office use, the CPA added.
The current level uncertainty over Brexit negotiations was noted by Investors interviewed for the forecast report as limiting interest in up-front investment in floor space and buildings for a long-term rate of return. Output in this area is expected to have fallen by 10 per cent by the end of the year and by an additional 20 per cent in 2019.
CPA economics director Noble Francis said that construction output was expected to increase next year, however the scale of this increase would be dependent on house building outside London and major infrastructure work offsetting declines in other areas.
Mr Francis said, “The forecasts assume that the UK and EU will agree a deal on Brexit towards the end of the year but the continued uncertainty over a ‘No Deal’ Brexit has already had a big impact on construction new orders in construction sectors dependent on high upfront, often international, investment for a long-term rate of return.
“These include the construction of prime residential in London, industrial factories and commercial offices towers.”