Total GB construction output in 2018 is forecast to see volume growth of 2.1%, a lower growth figure than 2017 which saw a year on year increase of 5.1%. Total output, at 2015 prices, is forecast to increase to 159.6 bn in 2018.
Construction growth in 2018 will mainly be driven by public housing, private housing and infrastructure and, to a lesser extent, the industrial sector (which includes warehousing and logistics operations for online retailers) and repair & maintenance in private housing. However, the commercial sector, one of the largest parts of the market, will see a decline.
Although GDP growth is expected to be broadly maintained at around 1.7% pa in 2018, according to Treasury forecasts, the uncertainties surrounding Brexit will slow growth in some sectors, in particular office construction. However, to put these figures into context, the total output in 2018 is still forecast to be the highest level of construction output on record as the growth sectors are expected to more than outweigh those in decline or static.
Mel Budd, Director at Leading Edge, said looking ahead to 2019 and 2020, we expect to see total construction output continue to see real growth although performance will vary by sector and with the inevitable caveats on Brexit uncertainties. The office market is likely to be the hardest hit. Overall activity will be boosted by large increases in output in the infrastructure sector where spending on energy, road and rail projects will grow. Public housing will also benefit from new government initiatives to boost the housing stock.
Mel added, although it may yet see some minor revisions, the total output figure for 2017 means that the construction industry has grown in real terms for 5 years in a row with the last 3 years seeing record breaking levels of output. Total construction output in 2017 was 26.1% higher than 2012 in volume terms.
Output would have been higher in 2017 after strong growth in Q1 - Q3 but it fell away in the final quarter, in particular in public, industrial and commercial new build. In these sectors Q4 output was lower than the equivalent quarter in 2016, possibly a sign of things to come. The public sector consists mainly of education and health while commercial consists of offices, retail and leisure. New orders in 2017 (a forward indicator of output) also showed a marked decrease in commercial.
The main growth areas in 2017 when compared to 2016 were public housing (+13.1%), private housing (8.3%), Repair & Maintenance in private housing (+9.9%), infrastructure (+6.7%) and commercial (+4.9%). There were 2 sectors that declined year on year: public (-3.6%) and industrial (-3.0%).
Key Topics Covered:
- Total construction output by sector 2011-2020
- Growth by industry sector up to 2020
- Housing starts, completions and transactions - actual and forecast: 2006 to 2020
- Total construction output long term trend
- % forecast split of construction output by sector 2018
- % share of construction output by region 2017
- UK Economic forecast
- Graph for each individual construction sector showing actual and forecast output 2008-2020
- Brief note on forecast performance for each sector
- Explanation of what construction activity is included in each sector
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