Construction sees sharp slowdown

Construction Slowdown
Construction Slowdown

The UK construction sector is forecast to shrink by a record amount in 2009.

The CPA (Construction Products Association) will say on Monday that it expects the sector to contract by 16% this year.

The CPA said the long lead time for contracts meant the commercial property slowdown was only just starting to show, it predicts a 5% fall in 2010.

In April, the group had forecast a more moderate fall in output of 12%.

The group, which represents the UK‘s manufacturers and suppliers of construction products, components and fittings, added there was a risk that growing public debt could threaten public sector construction as well.

Aggregate Industries chief executive Bill Bolsolver said the outlook for the sector “was bleak”.

CPA economics director Noble Francis said the number of new build homes is expected to fall this year to its lowest since 1924, excluding during World War Two.

New build offices are set to drop by 38% compared with last year and, and by 2010 new build offices are expected to decline by more than 50% compared with 2008.

Both the industrial sector and the private housing sector have felt the pinch of the downturn quickly as factories and warehouses have closed, and individuals buy fewer homes.

“But the contraction in the commercial property sector, worth £16.7bn in 2008, tends to move into recession more slowly,” added Mr Francis.

Work finishing off large offices and retail complexes – which have a longer lead time – tends to continue even during a recession.

Last year, office and retail projects dating back to 2006 were still in the pipeline, said Mr Francis. He said greater access to credit and a wider economic recovery was needed to boost private sector construction, adding that it would take time for low interest rates to feed through, but he said there was a concern that the public sector – which amounts to one third of all construction – could contract as government borrowing reaches record levels. He added, if this happened before the private construction sector recovered this could prolong the slowdown in the sector.

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