CPA forecasts 4.3% Growth for 2022

CPA forecasts 4.3% Growth for 2022

Jan 26, 2022

In an optimistic tone, the Construction Products Association (CPA) is predicting a 4.3% growth in the UK construction industry due to Covid bounce back and buoyant house-building projects based on the latest quarterly forecast.

The CPA predicts, however, that UK construction industry growth will return to a more sustainable 2.5% in 2023 when supply issues settle.

The Rise in Private Housing

Output in private housing is forecast to rise by 3.0% in both 2022 and 2023 following 17.0% 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 feed through. The outlook for volume remains positive, with most major housebuilders reporting strong near-term demand and healthy profit margins.

The private housing repair maintenance and improvement (RMI) sector is forecast to remain flat this year, having reached an historically high level after 17.0% growth last year. Rising renovation project costs and higher inflation rates are expected to slow down consumer spending on larger projects. UK households have benefited from building up more than £200bn of savings from the past two years but rising costs are spelling caution for spending compared to 2021, the CPA says.

Supply Issues Have Improved – For Some

CPA economics director, Noble Francis, said that issues of supply, though less severe than in 2021, would affect different companies in different ways, “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.”

However, he pointed out the challenge of smaller firms: “[They], 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.”

All in all, a positive outlook for the construction industry, particularly with housebuilding reporting strong volumes and healthy profit margins, despite a slowdown in the RMI sector when many converted their homes to accommodate their new work-from-home lifestyle.  As material costs rise and inflation rates slowly increase, expect to see a slow-down on larger projects.  Read more about this topic here.

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