Despite output dipping 0.6% in 2018, the Construction Products Association's (COA) Summer Forecasts is anticipating a 2.3% rise in 2019 and a 1.9% increase in 2020 thanks to house building and infrastructure activity.
In private housing, first-time buyer demand, enabled by the government's Help to Buy scheme, continues to boost sentiment and encourage an increase in housebuilding activity outside London, with output in the sector expected to rise 5% in 2019 and 2% in 2019.
Elsewhere, infrastructure also remains a primary driver of growth for the industry, with forecasts predicting a historic high of £23.6 billion by 2020 due to large projects such as HS2 and Hinkley Point C. Yet, work on both projects is significantly delayed, the sector will be hoping government will push to ensure delivery on the ground. Without the expected growth in infrastructure and private housing activity, output is expected to fall by 3% this year and remain flat in 2019.
The predicted growth is good news for the UK's construction sector, as the collapse of industry giant Carillion in January, combined with the bad weather, cost the industry £1bn of work. While 60% of this work may be recovered, the CPA said Carillion's collapse will cause further delays at two major hospitals as work on the £335m Royal Liverpool University and Birmingham's £350m Midland Metropolitan hospitals is on hold until at least 2019.
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However, the commercial sector is still in sharp decline due to Brexit uncertainties, with the offices sub-sector expected to fall 20% this year and a further 10% in 2019. Meanwhile, the shift to online shopping is causing woes for the high street, with new retail construction expected to fall by 10% this year.
Noble Francis, Economics Director at the Construction Products Association, said the first quarter of this year was difficult for the industry.
"Things improved markedly in the second quarter due to a catch-up in work as we would have expected but, overall, it's mixed fortunes for contractors at the moment," he said.
"On the positive side, house builders are keen on accelerating building rates outside of London and that is expected to be enough to offset sharp falls in house building in the capital.
"Firms working on major infrastructure projects also have a lot of work in the pipeline. Infrastructure output is forecast to rise by 3% in 2018 and 13% in 2019. This growth is highly dependent on large projects such as HS2 and Hinkley Point C, the first of the new nuclear power stations but, as ever, there remain concerns about government's ability to deliver infrastructure projects without the cost overruns and delays that we have seen on Crossrail and HS2 recently.
"On the negative side, the elephant in the room is clearly Brexit uncertainty, which has had a big effect on international investment, especially where it is high up-front investment for a long-term rate of return, which is now highly uncertain. It badly affects demand in sectors such as prime residential in London, commercial offices towers and industrial factories, which is dependent on manufacturing.
"Overall in construction, there is forecast to be a slight fall in activity, of -0.6%, in 2018 after five consecutive years. However, in 2019, we are anticipating of growth of 2.3% due to house building and infrastructure."
(LM/MH)
