Over the next two years, the civil construction sector in Australia is expected to decline even further than it already has, a new survey suggests.

Releasing the results of their Civil Construction Outlook survey based on responses of 100 major construction contracting firms, the Australian Industry Group (Ai Group) and the Australian Constructors Association (ACA) said that following a 3.6 per cent decline in 2014, the overall value of major building work done on civil, commercial and multi-residential projects was expected to contract by 4.3 per cent in 2015 and 1.7 per cent in 2016.

Leading the decline will be the engineering construction sector, where activity is expected to drop by 7.6 per cent and 3.6 per cent in 2015 and 2016 respectively.

Almost all parts of the sector apart from transport and telecommunications are expected to be impacted, with oil and gas, mining, petrochemical, water and electricity to be most affected.

Gains within the commercial sector are expected to be modest as strengthening private sector activity is expected to be offset by subdued levels of public investment. Apartments, meanwhile, are the standout performer amid the current boom in residential construction.

The latest survey follows an earlier report by BIS Shrapnel forecasting that the overall dollar value of engineering work done throughout Australia would fall by 13 per cent in 2014/15 and 15 per cent in 2015/16.

Around Australia, activity in the civil construction sector is winding back as major resource projects move toward completion. While the mining sector has been most impacted, other sectors are also experiencing a decline.

The electricity sector, for instance, is facing limited demand for new infrastructure amid an excess of capacity after a ramp up in poles and wires over the last decade was not matched by anticipated growth in energy consumption.

Water, too, is experiencing a decline following years of strong building activity as desalination plants were constructed, while demand for new oil and gas infrastructure is being impacted by recent weakness in oil prices.

ACA executive director Lindsay Le Compte said the resource sector slowdown posed significant challenges for the industry notwithstanding strong residential conditions and solid levels of transport investment.

“The winding down in mining-related construction will be the major drag on activity, although notable falls are also expected in the heavy industrial resource based sectors,” Le Compte said.

Key findings

According to the survey:

• The overall value of turnover from major construction work is expected to decline at a rate of 4.3 per cent in calendar year 2015 followed by a further fall of 1.7 per cent in 2016. This follows a fall of 3.6 per cent in 2014.
• The value of commercial construction work is expected to increase by just 1.3 per cent in 2015 and 1.5 per cent in 2016, following flat conditions in 2014.
• Engineering construction is forecast to decline by 7.6 per cent in 2015 and a further 3.6 per cent in 2016. The winding down in mining–related construction will be the major drag on activity. There is also expected to be notable declines in heavy industrial projects such as oil and gas processing which is set to peak in 2015 before experiencing a marked downturn in 2016.
• Employment in non-residential construction is forecast to decline for the remainder of 2015, concentrated on employees principally engaged on-site (a drop of 2.6 per cent) and sub-contract tradesmen (a drop of one per cent).
• Non-residential construction employment is expected to then recover somewhat in 2016.
• For multi-level apartment developments, solid growth in turnover of 14.5 per cent is expected in 2015 followed by a 4.1 per cent rise in 2016.This reflects strong growth in apartment building approvals in recent months in Sydney, Melbourne and many other locations around Australia.