Construction growth predicted to rise by 2.7% in 2019 after flat 2018

The demise of Carillion and adverse weather across the country in the first months of the year is being blamed for what is expected to be a flat year in terms of output in the construction sector.

But there is light at the end of the tunnel for the industry, with forecasters at the Construction Products Association (CPA) claiming growth will accelerate to 2.7% in 2019 and 1.9% in 2020.

Infrastructure and private housing have been highlighted as the only two bright spots this year amid a fall-off in commercial work hit by a 20% drop in office construction. 

2019 is set to be a more promising year with civil engineering contractors expected to benefit from infrastructure output jumping 13.1% as work accelerates on large projects such as HS2, the Thames Tideway Tunnel and Hinkley Point C. In private housing, output is forecast to rise 5.0%, with demand for new build underpinned by the support of Help to Buy through to March 2021.

Noble Francis, economics director at the CPA, said: "The start of the year was a bad one for construction. Carillion, the UK’s second biggest contractor, went into liquidation in January and led to a hiatus on infrastructure and commercial projects. The snowy weather badly affected work on site for at least three working days in February and March and, as a result, 2018 Q1 construction is likely to be £1.5 billion lower than in 2017 Q4. Fortunes for the industry overall will depend on the extent to which construction activity catches up during the rest of the year.”

The sharpest decline in growth is forecast in the commercial sector, where a post-EU Referendum fall in contract awards for new offices space since the second half of 2016 is expected to translate into a fall in activity this year.

Offices construction is expected to decline 20.0% in 2018 and 10.0% in 2019. The impact of Carillion’s liquidation will be felt on commercial PFI health projects, including the Midland Metropolitan Hospital and the Royal Liverpool Hospital, where work has been paused to reassign or retender contracts. Output in the PFI health sub-sector is forecast to fall 5.0% this year.

Francis added: "Construction activity is forecast to be flat this year and rise by 2.7% next year, primarily driven by infrastructure and private house building. Half of the activity lost in Q1 is expected to be regained during 2018. Work on some Carillion projects has already restarted, on joint-ventures or where major clients such as Network Rail have been keen to continue work. Other projects will take time to retender but are still likely to restart this year. Large infrastructure projects should also allow for a catch-up after the adverse weather and often have penalty clauses for delays. Despite the sector’s strong growth prospects, questions remain about poor government delivery of major infrastructure projects.”