Latest CPA Construction Industry Forecasts 

The latest CPA Construction Industry Forecasts have been released.
 
Key points from the forecasts include:
 

  • Construction is forecast is up slightly. Growth of 13.7% in 2021 and 6.3% in 2022 after the Office for National Statistics (ONS) revised 14.0% fall in output during 2020. In Spring the forecast was for growth of 12.9% in 2021 and 5.2% in 2022 after the ONS’s original fall of 12.5% in 2020.
  •  Demand continues to be strong in infrastructure, industrial warehouses, housing new build and repair and maintenance, pointing towards even stronger growth. The supply of imported construction products and skilled labour will continue to restrict growth rates over the next 18 months with SME contractors particularly affected.
  • Infrastructure is expected to be the key driver of construction growth in 21-22 due to major projects such as Hinkley Point C, the Thames Tideway tunnel and the HS2 rail project. Further delays and cost overruns on major projects in addition to clients’ hesitancy in signing off medium-sized projects that has led to a slowdown in the pipeline near-term.
     
  • Housebuilding starts are forecast to rise by 20.9% in 2021 and a further 9.0% in 2022 as all major house builders continue to report that demand and inflation, particularly for houses outside cities, continues to be buoyant for at least 6-9 months despite government stimulus such as the stamp duty holiday and Help to Buy now continuing in a restricted form.
  • Private housing repair, maintenance and improvements (rm&i) has been the quickest construction sector to recover since the initial national lockdown. Output in March 2021 was 19.3% higher than in January 2020, pre-Covid-19, according to the Office for National Statistics (ONS) due to the ‘race for space’. There appears to have been no slowdown in the demand for additional, better quality outdoor domestic leisure space as well as better home office work environments with most SME contractors reporting projects lined up for at least the next six months. Private housing rm&i output is forecast to rise by 16.0% in 2021 and a further 3.0% in 2022.
     
  • Whilst activity in most construction sectors is currently buoyant, commercial activity remains subdued. Output in May 2021 was still 19.1% lower than in January 2020, pre-Covid-19 according to the ONS. Activity did pick up at the start of the year, primarily on fit-out work remodelling offices for use as people return to offices in a socially distanced manner and to provide better quality, more space per worker given fewer office workers are likely to be in the office at any point in time. In addition, fit-out work accelerated during 2021 Q1 focusing on refurbishing, reusing and repurposing retail and leisure space preparing for reopening as social distancing restrictions eased. In addition, some towers projects that had the contract signed or were started pre-Covid-19 continued in the first half of this year but the key concerns are that there are fewer new towers projects in the pipeline to replace those that are finishing. This is particularly the case for London, which accounted for 36.2% of commercial construction output in Great Britain during 2020.
  • The key constraint to the CPA construction forecasts remains the cost and availability of imported products and skilled labour. The sharp recovery in some sectors over the last 12-15 months not only in the UK but also in many key global construction markets such as the US has led to increased cost and extended lead times for some key products such as paints and varnishes, timber, roofing materials, copper and steel. The greatest impacts of the availability and cost of products are falling on SMEs (which account for 86% of construction employment). Whilst larger contractors and house builders have a certainty of pipeline and are better able to plan and purchase in advance, SMEs ‘just in time’ purchasing model is subject to greater issues if supply is limited and costs have risen significantly, particularly for firms working on fixed price contracts. On the labour side, some contractors are finding that there is a currently shortage of key skills in some key hotspots of activity, which has been exacerbated by the fall in EU construction labour. The number of EU construction workers in UK construction has fallen by 42% over the past four years according to the ONS.

Download the full report here:

Construction Industry Forecast Summer 2021 xls

Construction Industry Forecast Summer 2021 pdf

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