At the start of last year many companies were optimistic about prospects for 2012, but as the months passed that optimism faded as the small growth expected failed to materialise. The latest figures for the UK economy show that we have narrowly avoided a triple dip recession. The economy grew by 0.3% in the first quarter of this year, as stated in the preliminary estimate just released by the Office of National Statistics , this is far higher than the 0.1% predicted by analysts. Yet the GDP has been broadly flat over the last 18 months.
As Britain narrowly avoids a triple dip recession what is the outlook for the construction sector?
In this blog we review the recent Spring Forecast released by the Construction Products Association, drawing comparisons with their same report of the previous year. We also review comments by other leading forecasters and look at how construction manufacturers can prepare for the challenging times ahead.
Comparing the recently published Construct Products Association forecast for Spring 2013 with that from a year ago we see that back then overall construction output for 2012 was forecast to fall by 2.9%, whereas the actual figures for 2012 show that output in fact fell by 8.1%.
In the CPA Spring 2013 forecast, the overall output for 2013 has been downgraded compared to the forecast a year ago. This has changed from an expectation of construction output to remain flat in 2013, to a forecast predicting a decline by 2.1% in 2013. In 2012 the spring forecast for overall construction output in 2014 was that it would begin to recover with an increase of 3.4%; In the most recent forecast this also has been downgraded, with a new forecast seeing an increase of just 1.9%, which is also from a lower base.
Another disappointment in 2012 was private housing where increases were expected but did not happen. In 2012 the CPA spring forecast estimated a rise of 3.0%, but the actual figures show a fall of 4.3%. As a result the CPA has downgraded its 2013 forecast from an estimated increase of 6.0% to just 2.0%.
Public housing did not perform as badly as expected. Last Spring the expectation for 2012 was a drop of 20.0%. The actual fall was 18.4%.
In summary, the disappointment of 2012’s worse than expected performance has seen £45.66 billion of expected construction activity evaporate for the period 2012 to 2016. In the recent past we have seen construction output fall by more than 8% since 2011, the point at which the Coalition published its Plan for Growth.
“Last year was extremely disappointing for the construction industry given the frequent government announcements on boosts to housing and infrastructure” says Noble Francis Economics Director at the Construction Products Association, he goes on to say: ” This year is likely to be just as challenging with further austerity cuts and private commercial, the largest construction sector, expected to fall 7% in 2013. Private housing and infrastructure should be boosted by previous government policies feed through but the risks are still on the downside, especially following a poor first quarter to the year.”
The other leading industry forecaster, Experian, described 2012 as “a very bad year for construction” while “prospects for this year are not good.” They do expect overall construction performance to improve up to 2017, but by less than 1%, with patchy performance and further declines in output from the public sector. In the long term they do not expect construction output to exceed the highs of the last decade until 2023, or later.
All of this makes life very difficult for companies trying to plan their business. Just offering the lowest prices you can (or cannot) afford will lead to disaster. Companies need to adopt a strategy which allows them to focus on the sectors which offer the best opportunities. Part of that process should include accurate forecasting so it is possible to identify the trends and opportunities in this uncertain market.
Conducting regular forecasting can help you to:
- Clearly identify the future demand for goods and services
- Identify trends in the market ahead of competitors
- Benchmark your performance against competitors
- Evaluate market size and opportunities
To help companies Competitive Advantage has developed a personalised forecasting model, based on reliable data published by the CPA but personalised to reflect the business profile of each client.
By analysing the nature of your business and correlating this with industry forecasts we can help you to reduce uncertainty and so improve your business planning by indicating trends, showing the potential value of each sector to your business and changes in your market share.
To learn more about how we can help your business prepare for the future send us an email firstname.lastname@example.org or simply pick up the phone and have a chat: 01276 503539. We aim to provide high quality information at an affordable cost.
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