U.K. Construction Market Shows Sharp Declines

Jul 9, 2009 11:07 AM

According to the latest forecast from the Construction Products Association, a London-based group representing the manufacturers and suppliers of construction products, components, and fixtures in the United Kingdom (U.K.), the outlook for construction has deteriorated sharply over the last three months. Unfortunately, based on the most recent figures, it doesn’t appear a short-term recovery is in the market’s future. Output is expected to fall by a record 16% in 2009, which is worse than the 12% drop projected in the April forecast. Prospects for 2010 also are expected to decline with the association now forecasting an additional 5% decrease compared to its previous forecast, which projected a fall of 3.4%.

“Prospects for the industry have deteriorated significantly over the last three months with new orders for construction work falling at a record rate,” says Michael Ankers, the association’s chief executive. “This year, we expect the industry to suffer its largest fall ever experienced in a single year. With a further fall in output in 2010, output will have fallen faster in these two years than in any of the previous post-war recessions.”

Breaking down the forecast by segment reveals more specific shortcomings. Although the private sector housing market has experienced some small improvement over the last few months, Ankers suggests the forecast reveals there will be only 72,000 new houses built this year — this number is the lowest figure since 1924 and 20% below 2008 starts. The sharpest declines in output are in the commercial and industrial sectors with investment in new office, retail, and industrial building having come to a halt. In fact, output on commercial work has fallen by more than 40% in just two years. Offices construction is projected to fall by 50% in less than two years, and retail is expected to drop by 42% by the end of 2010.

For the industry as a whole, industry analysts do not expect a significant increase in construction output until 2012. In fact, by the end of the forecast period in 2013, they predict the industry will have recovered only to the levels of output achieved in 1999. Amidst this gloomy forecast, the only bright spots for the construction industry are the continued investment by government in education and health programs coupled with the prospect of increased investment in infrastructure, particularly rail schemes, which are expected to increase almost threefold by 2013.