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Construction sector to shrink 3% in 2010

The construction sector will contract by 3% in 2010, on top of a massive 12% contraction in 2009, according to the Construction Products Association (CPA) today.

The CPA say the estimated 12% contraction for 2009 is the largest single fall since records began in 1955, but a further decline of 3% is expected this year, and a slow recovery of up to 0.5% per year is not expected until 2011.

The group’s 2009-2013 ‘forecast’ suggests the major concern for the industry is very low levels of activity for the private sector, with sharp falls in commercial - which declined by 26% in 2009 and is expected to fall another 15% in 2010 - and industrial - which has declined by as much as 48% over the past two years and another 2% this year.

CPA Chief Executive Michael Ankers said: “Construction has been one of the sectors of the economy worst hit by the economic downturn, and whilst it is widely believed that the wider economy is now out of recession, the construction industry is going to have to wait for at least another 12 months.

“Output on office, retail, and other commercial projects has been particularly badly hit, and last year’s fall of over 26% is expected to be followed by a further fall of 15% this year. At the same time, output on industrial projects, which has already fallen over 50% from its 2007 peak, is expected to fall still further during the next 12 months.

“On the positive side, new private house building which fell to levels not experienced since the 1920s has started to recover with starts this year expected to be 15% higher than in 2009, and with similar levels of growth in each of the next three years.

“The major concern for the industry is public investment in construction where work on the major hospital and schools programmes has helped save the industry from even more dramatic falls in output. Looking ahead, however, the recent Pre-budget Report confirmed that there would be sharp cuts in government capital spending over the next three years, and if these occur before there is any significant recovery in private sector construction,  then there is a real danger that what we currently anticipate as being a three year downturn will extend even further,” he said.

The CPA say that:

  • Trend growth in construction output will increase every year after 2013, but it would take until 2021 to reach the level of output that the industry enjoyed in 2007
  • Infrastructure will see consistent growth, driven initially by significant investment in rail and road projects, and towards the end of the period by Crossrail and the start of the nuclear programme
  • Even with the levels of growth for private new housebuilding in these forecasts the number of starts in 2013 will still only be 75% of the number achieved in 2007, and only just over half the number that the Barker Review recommended was needed to meet housing demand

    ·        There will be a further fall in private housing repair and maintenance in 2010 before the sector recovers quite strongly in the following three years as the wider economy strengthens and unemployment starts to fall

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In conclusion, Ankers said; ‘The construction industry is a major part of the economy and it is hard to see how there can be any significant recovery whilst construction is still in recession. In addition, what the industry provides in terms of roads, rail, and energy infrastructure, as well as modern, efficient, and low carbon buildings, is key to a sustained recovery in our manufacturing and service sectors. In the run up to the General Election, it is critical that the major political parties recognise these points and ensure they are reflected in the policy proposals they put before the electorate.’

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