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Construction sector growth set to bounce back in 2019

The hiatus on growth this year ends the industry’s five-year run, which had been fed primarily by robust industrial and commercial activity as well as private sector homebuilding.

While the growth forecast for 2019 and 2020 will benefit trade contractors and civil contractors employed by housebuilders, commercial building contractors are expected to keep feeling the pressure in both retail and commercial work opportunities.

The Construction Products Association economists recently issued a forecast that revises 2018 results from stagnation to halting, due primarily to severe weather conditions and the aftereffects of Carillion.

  • It is predicted that construction sector growth will resume in 2019 and proceed to increase by 1.9% in 2020.
  • Robust housebuilding activity outside London will increase sector activity by 5% this year and 2% the year after.
  • Private housing starts will go up by 2.0% this year and the next
  • Commercial office construction will decrease by 20% in 2018 and 10% in 2019
  • Output in commercial retail will fall by 10% in 2018 and remain level in 2019
  • Infrastructure construction will increase by a mere 3.2% in 2018 and 13% the following year

Structural Defects Insurance

Without the expected growth in private housing activity and infrastructure, construction output would go down 3% in 2018 and remain level in 2019.

The demise of Carillion negatively impacted construction sector growth at the beginning of the year which, when combined with inclement weather, resulted in a loss of £1bn of work for the UK construction industry.

An estimated 60% of these lost jobs are expected to be recovered, but the collapse of Carillion will cause additional delays at major projects such as the Royal Liverpool University Hospital and Midland Metropolitan Hospital.

Uncertainty over Brexit continues to propel the decline in construction activity in the commercial sector, especially in the office's subsector. It is expected to fall 20% this year and an additional 10% in 2019.

Meanwhile, the growing trend toward online shopping is causing problems for the high street, with retail construction expected a decrease by 10% this year.

Construction Products Association Economics Director Noble Francis said that overall, the situation for contractors is difficult. Housebuilders want to increase building rates outside of London, which is expected to offset sharp decreases in the city. He said that firms involved in major infrastructure projects also have a lot of work coming up, with output expected to rise by 3% this year and 13% in 2019.

Mr Francis explained that this growth depends largely on large projects like Hinkley Point C and HS2. Concern remains about the ability of the government to deliver infrastructure projects without delays and cost overruns. There is also the uncertainty over Brexit, which has negatively impacted international investment, especially in cases where a lot is invested up front for a long-term rate of return.

He said that the situation harms demand in sectors such as commercial office towers, prime residential in the capital, and industrial factories, which depends on manufacturing.

Specialists in Construction Insurance


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