July 2012: Some recent forecasts about prospects in the construction industry have been slightly depressing. For instance, the Construction Products Association said on Monday that construction output will fall by 4.5% in 2012 and a further 1.3% in 2013.
It also predicts a fall in house building of 3% – a forecast supported by the BNP Paribas / Tristan Fitzgerald Associates report entitled Housing the Nation in which the authors say that 2012 housing completions will be less than 100,000. To put this into perspective, these are the kinds of figures last seen in 2009.
So what about the Green Deal – surely this will have an effect? Again, according to the Construction Products Association, this will have ‘little effect on private housing repair, maintenance and improvement’, but will help to mitigate falls in RMI within the public housing sector. Even with this effect though, there is a forecast of 5% in 2013 and a further 1% the following year.
Where are the bright spots then? Infrastructure should increase as plans for improved rail connections boost rail construction significantly. Also the need for increased energy production should help increase construction figures overall.
So what does this mean for the whole economy? Well, the construction sector contribution to overall GDP has been falling steadily since a peak in the late 1980s. In 1988, it wasn’t unusual to see a quarter GDP with over 11% made up from construction. In quarter 1 2012, that figure was just over 7% – a fall from 7.5% last year.
So, all in all, construction looks like it’s going to have another couple of hard years, but if the general economy improves, there’s a fair chance that construction will improve too.
The twitter feed of Jablite’s resident housing and economics expert, Damien Pooley, can be found at www.twitter.com/damienpooley