Construction output forecast scaled back to 1.3% for 2017

TOTAL GB construction output volume in 2017 is forecast to grow by 1.3% compared to 2016, according to the construction research specialists Leading Edge. This takes total output to £136.4bn in 2017, at 2013 prices.

Since its last forecast in March 2016, Leading Edge has downgraded its expectations for 2017 from 3.5% growth to 1.3%, a cut of around £3.5bn on total output. This is mainly due to a reduction in expectations in growth for the overall economy and uncertainties surrounding Brexit.

Output in the offices sector is expected to be hit while the retail sector continues to suffer from the growth of online trading. Housing growth forecasts have also been cut back, although they are still positive.

Leading Edge expects to see 2016 finish with a similar total output to 2015 after a disappointing third quarter where the impact of Brexit caused some delays in building projects. There have been some notable declines in output in Public Housing, Infrastructure and the Industrial sector during the year although these 3 sectors are expected to bounce back in 2017.

Mel Budd, director at Leading Edge, said ‘The latest government figures on new orders for Q3, the first full quarter post Brexit, showed growth of 5.5% on the previous year although it was down on Q2 by 2.4%. Although new orders do not always result in actual output, the year on year growth is a good sign and in particular Infrastructure is looking like it will deliver growth next year.’

Leading Edge forecasts that total construction output in 2020 will be 8% higher than 2016 after excluding the effects of inflation. Infrastructure will be a key growth area, where the government’s recent announcements in the Autumn statement will help boost output.

In addition the initiatives in the housing sector will help offset the impact of reduced overall growth in this important sector.

Mel Budd added: ‘Although the GDP forecasts for the UK have recently been downgraded, the UK economy is still relatively sound, and GDP forecast growth is similar to the Euro zone where expectations are 1.5% for 2017 and 1.7% for 2018. However, there are downside risks for UK construction, relating mainly to Brexit and international factors, although we haven’t yet seen any significant reductions in activity.’
www.lead-edge.co.uk