Construction set for growth despite potential supply issues, says CPA

This growth compares to a 13.3% construction industry output rate seen in 2021, which, says the CPA, demonstrates the remarkable resilience of the sector to the initial Covid-19 lockdown and the end of the Brexit transition period in 2020.

Housebuilding, the largest sector within the UK construction industry, is expected to remain buoyant while infrastructure will be the major driver for growth. Projects already underway in all sectors give great confidence for the forecast figures.

Product supply issues, a major challenge in 2021, have eased recently, but may still cause problems, particularly in the peak spring period and particularly for smaller building companies.

Output in private housing is forecast to rise by 3% in both 2022 and 2023 following 17% growth in 2021. CPA suggests that the double-digit inflation in house prices will fall as the impact of the end of the stamp duty holiday and the further restriction of the Help to Buy scheme feeds through. The outlook for volume remains positive, with most major house builders reporting strong near-term demand and healthy profit margins fuelled by demand for housing in affordable areas of the UK.

The private housing RM&I sector is predicted to remain flat at the historically high level reached with 17% growth last year. Rising renovation project costs and higher inflation rates are expected to slow down consumer spending on larger projects. 

CPA Winter Forecast indicates the infrastructure sector to remain as the main driver for growth in 2022. This mirrors the CPA Autumn Forecast which pointed to the five-year spending plans within the regulated sectors of rail, water, roads, and energy, allowing the sector to maintain activity levels and weather supply issues.

While supply issues have eased off over the past six months, the CPA still considers these to be the biggest challenge to overall growth, with questions over sufficient materials, products, labour, HGV drivers and imports will be at the forefront of industry minds. 

“Major house builders and main contractors are less affected as they have better visibility of medium-term demand and can plan and purchase well in advance; plus, they are the larger customers of the manufacturers, builders’ merchants and importers,” said Noble Francis, CPA economics director.

“Smaller firms, however, have found that availability issues have delayed projects and, consequently, revenue streams whilst sharp cost increases have hit margin, harming their viability even though they have strong workloads. Overall, the latest indications are that supply issues have eased recently, which is a positive sign, although it is still early in the year and before industry activity tends to ramp up in the spring.”