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Tories Taken To Task On House Building
Yet another fall in house building shows the Conservative party needs to match Labour in its commitment to building new homes, says the Federation of...
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Starts To Plummet
Glenigan has forecast that the construction sector will return to growth in 2024 but has also predicted that starts on site will plummet a whopping18% in 2023.
Glenigan is an insight and intelligence expert for construction. It produces various reports including it widely anticipated UK Construction Industry Forecast 2023-2025.
The key takeaway from this forecast is that the construction industry will struggle in the face of extremely challenging economic conditions - but there is a recovery in the not-so-distant future, with a 12% increase predicted in 2024 and 3% in 2025.
Trussed up - short-term growth still suffering
Construction starts fell sharply during the first four months of this year, as the fallout from last autumn’s mini-budget and a weak outlook dented investor and consumer confidence.
Ongoing conflict in Eastern Europe, materials shortages and cost inflation and more recently, spiking interest rates, are expected to delay work moving to site for the remainder of the year, with an 18% drop predicted.
Despite a tough start to the year and conditions remaining hard during the final six months of 2023, renewed construction growth is forecast for 2024 and 2025, with firm development pipelines already pulling through to support a rise in industrial and office starts. Improved consumer confidence and real-term wage increases are also expected to feed through to lift activity.
Housing
Housing activity fell sharply during the first four months of 2023 and is predicted to slow further throughout the year as housebuilders respond to weakening market conditions and regulatory assimilation, opting to build-out schemes rather than opening new sites.
Weak private housing starts are predicted to continue through the rest of the year, with Glenigan forecasting a 33% decline as falling real household incomes and rising mortgage rates cool housing market activity.
However, this slowdown appears temporary, with a renewed project-starts recovery anticipated in the second half of the forecast period, rising 7% in 2024 and 8% in 2025, as households’ financial positions and UK economic prospects improve.
Social housing slips back
The forecast for social housing project-starts is less positive, with starts predicted to remain flat for the duration of 2023 as construction materials costs and labour shortages continues to constrain activity. Approvals are similarly expected to fall back over the remainder of the year.
However, improved funding for affordable housing projects is anticipated in 2024 and is set to buoy the sector, with an 11% growth forecast for the period.
Higher borrowing costs are also likely to dampen student accommodation starts, near term but improved investor confidence in 2024 is expected to counteract this, lifting starts.
Public sector
Public sector construction is set to be a relative bright spot during 2023, as government departmental capital programmes are boosted by underspend rollover into the current financial year.
However, disruption to project-starts is likely in the run-up to the next general election and post-election, as a new administration looks to review and consolidate public sector investment programmes currently in the works.
Industrial Consolidation
Industrial project-starts have enjoyed a strong rebound post-pandemic, largely driven by significant growth in warehousing and light industrial projects. Looking forward, the sector faces a period of consolidation in 2023, before returning to growth in 2024.
Spiralling costs, labour shortages and supply chain disruption has tempered manufacturing investment in facilities, while slowing domestic and overseas demand is expected to exacerbate slow UK manufacturing output over the coming year.
Back to school
The government has also committed to rebuilding 500 schools over the next decade. Increases to the Department of Education’s capital funding over the current financial year are expected to support growth in school building projects during 2023 (22%) and 2024 (12%) following a weak performance last year.
NHS
Health project-starts are forecast to fall back during 2023, dropping by 17% as NHS resources are redirected toward addressing long waiting lists and resolving industrial unrest.
However, medium-term the outlook for the health sector remains positive, with NHS capital funding set to support a rise in starts from 2024, when the sector is forecast to see a 13% growth in project-starts, with a 3% growth in 2025.
To request a copy of Glenigan’s UK Construction Industry Forecast 2023-2025 click here.
Picture: Glenigan has forecast that the construction sector will return to growth in 2024 but has also predicted that starts on site will plummet a whopping18% in 2023.
Article written by Cathryn Ellis
20th July 2023