An edited version of this forecast was published in April’s Building magazine.

The construction industry looks set to suffer further difficulties before any improvement can be seen on the horizon. The public sector cuts will begin to bite harder now and those contractors who have benefitted from public sector profligacy over the last few years will have to look elsewhere and compete for the private sector slice of the pie. Business investment is expected to be weak this year with the OBR slashing its forecast for business investment from 7.7% in its forecast accompanying the Autumn Statement to just 0.7% now. Credit conditions have actually worsened as funding costs for commercial banks have risen and credit is expected to tighten further still over the next few months.

2013, it is hoped, will be a year of stabilisation. This should be sufficient to halt the spiral of falling prices but is unlikely to herald anything other than cost recovery. The forecast for the year to the first quarter 2014 is for construction price inflation in London of 0 to 2% but still -1% to +1% in the regions.

To read the Construction Market Forecast in full please click the download link on the left.