Positive outlook for construction following new peaks in quarterly output in late 2015

Total GB construction output has been positive throughout most of 2015, with output to Q3 being 5% ahead of 2014, with the quarterly value of £37bn representing a new output peak.

The outlook for the overall market remains positive into the medium-term with indications of potentially good recovery for both residential and non-residential sectors. AMA Research’s forecasts indicate overall output growth of 5-6% in 2015-16, followed by annual growth rates of 4-6% to 2020 when total construction output is forecast to reach around £179bn.

The short-term forecast for the residential sector has been amended downward due to the volatile nature of output in 2015 with growth of 4-5% currently forecast for 2016, followed by annual growth rates of 3-7% to 2020, when total residential output is forecast to reach £73.8bn. 

Housing completions should grow by around 10-15% in 2014-16, as the sharp increase in housing starts 2012-14 feeds through. Into the medium-term completions are forecast to reach a volume of around 201,000 in 2020, though the issues of mortgage affordability and increasing prices of new houses could negatively influence sectors of the house buying public. The likely phasing out of mortgage assistance schemes from 2019-20 onwards could also influence the affordability of some new housing.

The non-residential sector has seen output forecast amended to take into account the ONS realignment of infrastructure output in 2015. This means that short-term forecasts have growth of around 6% for 2015 rather than 3-4% indicated previously. This will then be followed by annual growth rates of 3-5% to 2020. Overall growth of 23% is forecast to 2020, when total output is expected to reach around £105bn. Both new work and RMI should show significant positive growth over the forecast period.

Infrastructure will remain the largest of the non-residential sectors into the medium-term with 30% output increase currently forecast 2015-20, and key to this growth will be the contribution from the electricity sector as well as larger-scale transport projects. Increasing levels of consumer and business confidence, spending and investment are likely to provide the drivers for the continued recovery of the private commercial sector, which will be the focus for growth into the medium-term. The performance of the public sector will be dictated by the continuing austerity programmes and limits placed on capital spending by both central and local government. However, impetus for the education sector will be focused on the Priority Schools Building Programme and investment from the University sector following the recent scrapping of the limit on student numbers.

The above information has been extracted from AMA Research’s quarterly bulletin ‘Construction and Housing Forecast Bulletin’, which is sold as a subscription covering 4 quarterly issues. To subscribe, click here.