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Construction forecast to narrowly avoid recession

NEWS

UK INFRASTRUCTURE work will fall to its lowest level since 1990 this year, but will start to grow in 2000 and a construction industry recession is at least three years away.

This is the double-edged message from NCE's analysis of the three main industry forecasts*.

Infrastructure orders for the first six months of 1999 have not continued the upward trend established in the last half of 1998 and, as a result, output is expected to fall by 4.1% this year. Workload has been particularly weak in the water and power sectors.

Next year is expected to see increased spending in the coastal/waterways and rail sectors and output is predicted to start growing, if slowly, for the first time since 1996.

Rail spend will be the real engine of the infrastructure recovery, but the forecast growth of 15% in the next two years is still lower than previously expected. It is also considered unlikely that the public private partnership plan to revive the London Underground will have much impact before 2002.

The long-awaited upturn in road maintenance is expected to add backbone to the recovery in 2001. There is also the possibility that orders could begin to rise by the end of 1999 if contracts for the £650M Birmingham Northern Relief Road and the £140M A13 DBFO are let. However, at present, road construction output is at its lowest level for 16 years.

The forecasts confirm that the non-housing new construction market, which includes commercial, industrial and public sector building, as well as infrastructure, will begin to run out of steam in 2001.

Output in this sector grew by 11.9% between 1996 and 1998 but is forecast to grow by only 1% this year, 0.5% next and 0.2% in 2001. Despite this, the industry is expected to narrowly avoid recession.

Public building is the healthiest sector, with growth of 10.6% expected during the first two years of the next millennium.

Both commercial and industrial building remain buoyant, despite global economic problems. New housing construction is tipped to increase by 1.8% in 2000 and 0.9% in 2001.

Forecasters are also looking to the repair, maintenance and improvement market for significant growth during the next two years, with output set to rise by 3.5% in 2000 and 3.4% in 2001. Public housing RMI work is leading the way and is due to jump nearly 17% in the next two years.

The entire construction market, comprising new work and RMI, is forecast to increase 0.8% this year, 2.6% in 2000 and 2.1% in 2001.

Alastair McLellan

alastairm@construct.emap.co.uk

*NCE's analysis is based on the latest forecasts produced by the Building Materials Producers, Construction Forecasting & Research and Hewes & Associates.

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