Our latest GB construction forecasts take account of the most recent ONS construction output release (October 2019) which contains historical data revisions. The new data set show output rising by just 0.1% in 2018 , while over the twelve months to June 2019 output increased by 1.5%. This reading, along with weaker orders and economic growth in general, results in a forecast of 1% output growth for 2019. The outlook beyond then is one of decline, of close to 3.5% in 2020, and 1% in 2021.
The key area of risk is private housing. Output volumes in this market have doubled since 2012, which compares with 5% growth in non-residential work (taking account of infrastructure revisions). The latest data for England show a decline in starts over the twelve months to June 2019, while in the wider market prices are broadly flat, and transactions in marginal decline. Although Brexit uncertainty is often stated as the main problem for this market, our view is that wider, longer running issues (such as affordability) are in play. We expect housing starts to decline in both 2019 and 2020.
Infrastructure construction growth is currently influenced by vast cost overruns on Crossrail, and these will continue into 2020. While we expect HS2 to proceed, we do not expect it to proceed in its current form – more as a project with reduced scope. Meanwhile, robust levels of road and utility investment will help over the next few years.
Private industrial building continues to benefit from a strong warehouse market, and that will remain the case to 2020, while in the factory sector a steep drop in car investment is serving to depress factory building.
Public non-housing suffers from austerity-induced capital spending programmes, which are set to remain in place. However, if talk of an end to austerity actually transforms into reality (in terms of capital programmes), so the next decade offers hope for this sector.