12.9% Growth Forecast For Construction Sector in 2021

New economic forecasts are predicting large growth for Construction output this year. The Construction Products Association (CPA) this morning said it expected to rise by 12.9% this year and 5.2% next.

A record 29.3% growth is expected for infrastructure projects largely due to the ongoing HS2 railway work in addition to a big jobs in the power, water, roads and broadband sectors.

Housebuilding output is set to grow by 14% according to the CPA after the fall in 2020 due to the Pandemic spring lockdown.

There was caution however, while the body forecast that private housing output will return to pre-covid levels by 2022, output overall, including affordable housebuilding, is forecast to remain below 2019 levels until 2023.

The CPA’s economic director Noble Francis said: “The recovery in commercial – the third-largest construction sector – is expected to be muted given a lack of major investment in new projects, particularly in central London.

“Questions remain over future demand of commercial space, particularly in offices and retail, which may be converted into residential or warehousing and logistics, if homeworking and online spending persists in the long-term.”

Mr Francis added that materials shortages would curtail the recovery in construction. He joins other industry voices, including the CIPS and Construction Leadership Council, in warning hold-ups could quickly impact on jobs.

He warned: “There are significant risks to the recovery in the form of supply constraints in terms of extended lead times and sharp rises in costs for vital imported products such as paints and varnishes, timber, roofing materials, copper, steel and polymers. This may hinder the ability of construction activity to increase in line with our forecast.”

Continuation of Job Support Schemes, the Stamp Duty holiday and Help-to-Buy are expected to help sustain demand in private housing, which was the worst-affected construction sector in the first lockdown. It is expected to recover strongly in 2021. The chancellor’s mortgage guarantee scheme is also likely to enable higher demand in the general housing market.

With rising house prices during the year set to remain, activity is forecast to quicken in 2022. In addition, demand for contracted-out improvement projects, outdoor and office-related space requirements at home is likely to be maintained by households with higher incomes and those with savings due to a reduction in travel to work and other work-related expenses.