New house starts are expected to rise by 20.9% this year and a further 9% next year despite the scaling down of Help to Buy and the Stamp Duty holiday, according to the Construction Products Association’s latest Summer Forecast published yesterday.
Changes to the way people work in the pandemic have boosted private housing repair, maintenance and improvements (RMI). Output in March 2021 was 19.3% higher than pre-Covid times, according to the ONS, with most SME contractors reporting projects lined up for at least the next six months.
Construction output as a whole is currently very buoyant and is forecast to rise by 13.7% in 2021 and 6.3% in 2022, largely supported by major projects such as the nuclear power station Hinkley Point C, the Thames Tideway tunnel and the High Speed 2 (HS2).
This positive outlook comes despite the dual constraints of shortages and sharp cost rises in both imported construction products and skilled labour over the next 12 months. Infrastructure and private housebuilding are expected to be key drivers of construction growth in 2021 and 2022, while the outlook for the commercial sector remains subdued.
CPA economics director Noble Francis said: “The key constraint to the CPA construction forecasts remains the cost and availability of imported products and skilled labour. The sharp recovery for both UK construction and also in places such as the US, has led to sharp cost increases and extended lead times for some key products such as paints and varnishes, timber, roofing materials, copper and steel. This is of concern particularly for SMEs, which account for 86% of construction employment.
“Whilst larger contractors and house builders have greater certainty in their pipelines of work and are better able to plan and purchase in advance, SMEs often purchase what they need on the day at builders merchants. This makes them subject to greater issues if supply is limited or costs have risen significantly, particularly for firms working on fixed price contracts. On the labour side, some contractors are finding that there is currently a shortage of key skills in some key hotspots of activity, which has been exacerbated by the fall in EU construction labour by 42% over the past four years according to the ONS.”