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Growth forecast for construction despite public housing slowdown

Construction output will increase to 13.2% by 2017, with private house building a key driver of this growth, according to the latest forecasts from the Construction Products Association (CPA). 

A sharp fall in public housing, however, is expected to hinder short-term growth, while significant investment in building a skilled workforce will be needed to support construction in the medium term.

CPA economics director Dr Noble Francis said:  “Construction output is forecast to increase 4.9% in 2015 – almost double the rate of growth for the UK economy as a whole – and 21.7% overall by 2019. This will mainly be driven by an increase in work across the private housing and infrastructure sectors.

“Private house building is forecast to rise 9% in 2015 and 5.5% in 2016 as it benefits from a strong property market supported by rising real wages, increased mortgage availability and government policies such as Help to Buy. 

“However, public house building activity is expected to fall sharply – 10% in 2015 and 5% in 2016 – because of the negative effect of cuts to social rents and the extension of Right to Buy on housing association funding.”

Infrastructure is also predicted to be one of the key drivers of construction growth over the next five years, as the government has a national infrastructure plan in place with a pipeline of projects across the country worth £411bn.

As a consequence, CPA forecasts that infrastructure output will experience double-digit growth each year to the end of its forecast horizon in 2019. 

It is not all good news, however, as CPA expects delays until 2018 for the main works on the nuclear power station Hinkley Point C. In addition, because of concerns regarding planning and financing, it does not anticipate main works starting on HS2 before 2020.

The forecast growth of 21.7% by 2019 for construction has raised a key risk regarding the lack of skilled labour. 

Employment in the construction industry is now 390,000 lower than at its 2008 peak. 

So far, the lack of skilled labour has primarily affected the housebuilding sector. As the wider industry activity picks up however, Dr Francis said this issue was likely to spread across the industry.

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