Industry plunged into stagnation if HS2 delayed

Date: 29 Jul 2019

Forecasts for construction growth have been marked down again with the industry expected to shrink by 0.3% this year.

Crystal ball gazers warn that if major projects like HS2 are delayed the industry would not see growth again for at least three years.

Concerns around the government’s ability to deliver on major infrastructure projects have seen forecasts for 2020 and 2021 revised down to 1.0% and 1.4% from 1.4% and 1.7% respectively since the Spring.

The forecast also assumes an orderly Brexit and does not take into account the impact of a No Deal exit.

The Construction Products Association summer forecast singles out infrastructure spending as the main driver of growth making it vital to the fortunes of construction in the next few years.

Without the delivery of major infrastructure projects – put into further doubt given the new Prime Minister Boris Johnson’s commitment to initiate a review of HS2 – construction output would fall by 1.7% this year and experience no growth up until 2021.

Noble Francis, Economics Director at the CPA, said that with private housing now expected to slip and uncertainty hitting investment in commercial, industrial and retail projects maintaining infrastructure was essential to the overall health of the industry.

Francis said: “Construction output in some key sectors has already been badly affected by Brexit uncertainty over the past 18 months and when you add in rising concern about government delivery of major infrastructure, it is a highly uncertain time for the construction industry.

“It is essential that government commits to better delivery of the major infrastructure projects that it says are essential for the country.

“Only then will construction provide a boost to UK economic growth and give firms the confidence to invest in vital capacity and skills as well as modern methods of construction such as digitalisation and offsite manufacturing.”

Key points

  • Construction output to fall by 0.3% in 2019 before growth of 1% in 2020 and 1.4% in 2021
  • Private housing starts to fall by 2% in 2019 and return to growth of 1% in 2020 and 2021
  • Public housing starts to rise by 2% in 2019, 5% in 2020 and a further 2% in 2021
  • Commercial offices output to fall by 11% in 2019 and 4% in 2020 before remaining flat in 2021
  • Commercial retail output to fall by 15% in 2019 and 10% in 2020 before a 5% fall in 2021
  • Infrastructure output to grow by 9.3% in 2019, 7.4% in 2020 and 7.6% in 2021

Across the regions, construction activity remains high in the Midlands, North West as well as Yorkshire and the Humber.

But declines in activity are being seen in London, the South East and parts of the East of England.

In individual sectors, activity levels remain high in private and public housing, industrial warehouses and infrastructure.

In particular, infrastructure output is forecast to rise by 9.3% this year but this growth is highly dependent upon the delivery of the £4.2bn Thames Tideway Tunnel, the £19.6bn Hinkley Point C nuclear power station and the £56bn HS2 high-speed rail project.

Office and retail sectors continue to endure falls in activity, mainly due to weaker investor sentiment.

Original article:

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