Brexit slows growth but infrastructure powers ahead

The Construction Products Associations has revised down its output forecasts for this year and next amid concerns over the robustness of the economy and uncertainy caused by the EU referendum. But it is still predicting infrastructure as the star performer with a 56.3%  growth forecast for the  sector by 2019, driven by HS2 and other rail projects, as well as roads and utilities and including Hinkley C.

On infrastructure growth, CPA economist Noble Francis said the UK’s “most pressing issue” was whether the wider construction industry was capable of skilling up to dealing with demand.

“The most pressing issue is whether the wider construction industry actually has the skills available to deal with double-digit growth in the infrastructure, commercial and private sectors at the same time,” he said.

“By 2019, total construction output is expected to be £20bn higher than in 2015, yet employment in the industry remains 324,000 lower than it was over seven years ago. If the growth we have forecast is to be achieved then the serious issue of skills shortages needs to be addressed.”

Overall its new estimate points to growth of 3.0% for this year, down from a projected 3.6% in February and significantly below a summer 2015 forecast of 4.9%.

The CPA has today also revised its 2017 growth projection to 3.6%, down from the 4.1% it outlined in February.

Sector-by-sector, projections for private housing growth remain unchanged at 5% for both 2016 and 2017, but while the CPA is sticking to its projection of a 7% growth in office construction for this year, the earlier-predicted 7% rise for 2016 has been revised down to 6%.

Retail construction is projected to contract by 1.0% in 2016, returning to growth of 2.0% in 2017. The CPA projected a 10% increase in industrial warehouse construction in 2016 as part of growth connected with continued expansion in online shopping. It said the the sector set to increase by 23.6% over the next three-to-four years.

Francis said that the months leading up to the EU referendum in June will inevitably see a drop off in investment as increased uncertainty leads nervous investors to adopt a ‘wait and see’ policy until the referendum is out of the way.