The outlook for the construction industry in 2019

The construction industry, like many others, has faced a great deal of uncertainty in the past couple of years, and this is set to continue with our exit from the EU in 2019 – so what can construction workers expect over the coming year?

Despite earlier optimism, the Construction Products Association (CPA) estimated that the industry would only grow by around 0.3% in its Winter Forecast – a significant fall from the 2.3% increase predicted in its Summer Forecast. However, concerns have been raised about whether we’ll even be able to achieve 0.6% growth, as this will largely depend on the Government driving ahead with large infrastructure projects like HS2 and Hinkley Point C, both of which are currently in doubt.

With Brexit also looming, it could be a very turbulent year for the construction industry – so where are we likely to see growth (or lack of it)?

Key areas for growth

The private housing sector is set to grow by 2% in 2019, helped in part by the extension of the Government’s Help to Buy scheme, which accounted for almost one third of all housebuilding sales in 2018. The equity loan has been instrumental in sustaining demand for private homes in the North and the Midlands, which has helped to offset the fall in demand in London and the South East. As the Government has now confirmed it will end in 2023, the private housing sector should continue to be supported by the scheme in 2019.

The uncertainty around Brexit, which is having a negative effect on many industries, is also driving growth in others. With a ‘No Deal’ Brexit still a possibility, the harbours sector is expected to grow by up to 12% in 2019, and a further 10% in 2020 – but this could be even higher if it’s decided that our ports need to be improved and expanded. If we need to stockpile supplies as a result of issues around Brexit, we could also see an increased demand for storage facilities, with construction activity in the warehousing sector expected to rise by a further 10% in 2019 and 2020.

Areas at risk

For construction projects that require high up-front investment for a long-term rate of return, Brexit is much more problematic. Construction of commercial offices, for example, has already fallen greatly in 2017 and 2018, and new orders are expected to fall by a further 20% in 2019. Retail construction is forecast to fall by 4% this year, with investment in prime residential apartments and industrial factories also greatly affected by ongoing Brexit uncertainties.

Infrastructure is another area that is at risk, despite the CPA’s forecast that infrastructure will continue to grow until it peaks at a historic high of £23bn in 2020. However, this forecast is heavily dependent on the progress of HS2 and Hinkley Point C, and as both of these projects have already experienced delays and spiralling costs, there are questions around how accurate it will turn out to be. So, while this area will continue to grow this year, the CPA has already reduced its short-term forecasts for the growth of the infrastructure sector down from 13% to 8.8% in 2019.

Minimising risk in uncertain times

With much of the construction industry’s fate resting on pending decisions around Brexit and large infrastructure projects like HS2, many within the industry could find that construction projects dwindle in 2019. This means it’s more important than ever for construction suppliers to be visible and accessible to buyers, to ensure that they never miss an opportunity.

4000 buyers regularly use the Constructionline platform to find high quality suppliers, streamlining the procurement process for both buyers and suppliers. To find out more about becoming a member, head over to our memberships page.

 

Sources:

http://www.constructionenquirer.com/2019/01/20/forecasters-slash-2019-construction-growth-to-0-3/

https://www.showhouse.co.uk/news/cpa-downgrades-construction-forecast-again/

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