Despite the continuing shortfall between housing supply and demand, reflected in still-rising prices, builders are starting to be more cautious as clouds begin to gather over the market. The Confederation of British Industry forecasts that private sector housing output will fall by 4.9% this year and by a further 5.8% in 2004.
A less downbeat outlook for housing is indicated by Construction Forecasting & Research, which expects that output growth will fall from an estimated 9.6% in 2002, to just 3% and 3.1% respectively in 2003 and 2004.
CFR forecasts that overall construction output will increase by 4.5% this year and by 2.5% in 2004. Within the total, new construction output is set to grow by 5.4% and 2.2% respectively. Government commitment to investment in transport, education and health will help boost infrastructure and non-residential construction to grow by 12% and 13% respectively this year, and by 10% and 8% in 2004. However, the office market is expected to be hit hard by reduced company profits, and commercial construction is likely to fall over the next two years.
The public sector’s share of all new construction is set to rise from below 39% in 2002, to 44% in 2004. Public housing output is estimated to have increased by 18% last year, and growth of 8% is forecast in both 2003 and 2004.
Repair and maintenance
Growth in repair and maintenance work, which accounts for around 45% of all construction activity, is forecast to slow moderately. In 2002 it rose by an estimated 3.9% and is set to rise by 3.4% this year, and by 2.9% in 2004. Increases will be spread across most areas of construction, but the strongest growth will be in public sector, non-residential buildings, with an annual increase of 5% in each of the next two years.
The latest snapshot of current construction industry activity, from the Chartered Institute of Purchasing and Supply, reveals that the rate of expansion slowed for the second successive month in January, to the slowest since last September. Optimism in the industry remains high, however, although December’s strong intake of new orders slowed in January.
CIPS reports that purchases of materials rose during the month, in line with increased workloads, although the rate of growth was the slowest since July 2002. Suppliers’ delivery times have slowed again – for the 46th consecutive month.
The proportion of UK building materials producers working below capacity rose to 66% in the four months to January, according to the Confederation of British Industry. This is an increase from 44% in the previous four-month period. Nonetheless, optimism about the general business situation in the sector is broadly unchanged.
Separately published estimates suggest that sales of carpentry and joinery by UK producers, to the home and export market combined, rose by nearly 14% in the fourth quarter of last year compared with the same time in 2001. However, output of kitchen furniture rose by less than 1% over the year.
Imports rise
Overseas suppliers increased their UK sales strongly in the first nine months of 2002. The total value of imports of builders’ carpentry and joinery from EU manufacturers rose 8% year-on-year, to £106m, while imports from non-EU suppliers rose 20% to £143m. In contrast, UK exports of builders’ carpentry and joinery to the EU dropped by 10%, to £36m, and shipments to non-EU customers fell 29% to just £4m.
Factory gate prices of UK-produced carpentry and joinery rose by 2% over the 12 months to January, according to estimates by National Statistics; kitchen furniture prices were unchanged on the year; but wooden shop furniture prices rose 0.7%. Further back in the price pipeline the cost of materials and fuel purchased by wood and wood-product manufacturers rose by 1.5% in the year to January. For producers of construction materials overall, costs rose by 4.2% and for suppliers of house building materials, input costs rose 3.7%.