UK Construction Development Report

Analysts continue to disagree on prospects for the building industry, following problems that surfaced at the end of last year in US and international credit markets.

According to the latest UK Construction Market Development Report construction activity will maintain annual growth rates of around 3% to 5% in real terms between 2008 and 2012, in spite of an expected slowdown in economic growth in the coming year.

This contrasts markedly with the view of the Construction Products Association (CPA), which sees commercial construction, for example, dropping into large negatives - anywhere from minus 10% to minus 20% - between 2010-2012.

Much of MBD's analysis is based on expectations of government intervention in the industry. It points out that during 2007, it published a raft of new papers seeking ways to solve the imbalance between housing supply and demand and setting a target of two million new homes by 2016.

This, says MBD, suggests that by 2012, private housing output will reach £24,839 million, equivalent to a real-term increase of 25% compared with 2007.

It also believes that over the same period, public non-residential construction will benefit from extra investment especially within the education and health sector.

By 2012, MBD anticipates private-sector commercial output to reach £29,950 million (at 2007 prices), representing the single largest share of total new construction work in the year at annual growth rates of between 4% to 6%.

It sees the UK's continuing backlog of public-sector repairs buoy up the sector overall in the next five years. It expects annual real-term increases of between 1% and 3% to culminate in overall growth of 10% compared with 2007.

"By 2012, total repair and maintenance output is expected to reach £55.38 billion (at 2007 prices), equivalent to 40% of total construction activity."

MARKET FORECAST 2007-2011:

Construction output in Great Britain is projected to increase throughout the five year forecast period ending 2012. The rate of growth during the forecast period is expected to be moderate in comparison with the increases reported during the five year period up to 2007. Indeed, annual rates of increase are anticipated to oscillate between 2% and 4% in real terms taking the value of construction output to £134 905 million in 2012 at 2007 prices. The development of the market is expected to be strongly influenced by the delivery of government investment and the ability of local authorities to avoid the deferral of essential repair & maintenance work.