Construction output is set to grow 14 percent in 2021 and 6.3 percent next year, according to the Construction Products Association, CPA’s summer forecast released this week.
Private housing and infrastructure are likely to be the main drivers of construction growth this year and next, although the outlook for the commercial sector remains subdued.
CPA Economic Director Noble Francis said, “The main constraint on our projections remains the cost and availability of imported products and skilled labor.
“The strong recovery in both the UK construction industry and places like the US has resulted in sharp cost increases and longer lead times for some key products such as paints and varnishes, wood, roofing materials, copper and steel. This is particularly worrying for SMEs, which account for 86 percent of construction employment. “
He said that unlike larger contractors, SMBs can often shop from home builders a day and plan and buy home builders in advance because they have a pipeline of work.
“This makes SMEs more exposed to problems when supply is limited or costs have risen significantly, especially for companies that have fixed-price contracts,” said Francis.
Large housing companies continue to report demand in the housing market and house price inflation remains robust. The Nationwide Building Society index in July showed house prices rose 10.5 percent from the previous year and fell 0.5 percent from the previous month.
Housing construction is booming in the coming months
The CPA predicts that home starts will rise 21 percent this year and an additional 9 percent in 2022, despite the reduction in stamp duty vacation and purchase assistance programs. The prospects for houses outside of large cities are particularly good due to shifts in the work structure and should remain so for the next six to nine months, according to the house builders.
Changes in the way people work due to the pandemic have had a positive impact on the repair, maintenance and improvement of private homes, which have recovered the fastest. According to the Office for National Statistics, production in March of this year was 19.3 percent higher than before Covid. Most SME contractors report projects that are planned for at least the next six months.
Brokers Hank Zarihs Associates said development finance lenders reported increased demand for construction loans and quick bridge loans to meet healthy order books.
Large-scale projects such as the Hinkley Point C nuclear power plant, the Thames Tideway tunnel and the HS2 rail project are central to a strong performance in the infrastructure sector. The CPA has revised its infrastructure forecast for 2021 down from 29 percent to 23.4 percent growth, but has raised its forecast for 2022 from 5.9 to 9.7 percent due to further delays and cost overruns on major projects.
The summer forecasts also report an increasing reluctance on the part of customers to sign medium-sized projects, leading to a slowdown in the short-term pipeline for the sector.