Glenigan, one of the construction industry’s leading insight and intelligence experts, has released its widely anticipated UK Construction Industry Forecast 2023-2025.
The key takeaway from this Forecast, which focuses on the next three years (2023-2025), is that the construction industry will struggle in the face of extremely challenging economic conditions, with predicted declines of 18% during 2023. However, there’s recovery in the not-so-distant future, with a 12% increase predicted in 2024, and 3% in 2025.
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 in consumer-related verticals.
Public sector picks up
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.
Major civil engineering projects
Civil engineering starts will likely soften as sharp drops in infrastructure approvals throughout 2022 feed through to this year. Overall, civil engineering starts are forecast to slip back 9% in 2023 following a decline in main contract awards and detailed planning approvals.
Higher construction costs are expected to postpone infrastructure projects for the remainder of this year, however, a gradual strengthening in underlying starts is anticipated for the next two years, with a return to growth (+11%) forecast in 2024.
The delivery of existing and planned major capital projects will also be asignificant driver of sector activity over the forecast period, including HS2, the Silvertown Tunnel, and Hinckley Point C.
Further, utilities starts are expected to return to growth from 2024, as the water industry presses on with investments agreed with the industry regulator.
Project-starts are expected to grow by just 1% in 2025 as public sector investment plans are reviewed post-election, and as the water industry’s five-year investment programme draws to a close.
Commenting on the Forecast, Glenigan’s Economic Director Allan Wilen says, “The pattern of UK construction activity is being reshaped by economic slowdown and structural changes, while new regulations are transforming how projects are delivered. We are still in a state of extreme uncertainty, and the industry is set for a challenging period over the coming year.
He adds, “Civil engineering enjoyed a strong recovery post-pandemic, however, as with most sector verticals, high construction costs are causing investors to postpone projects as the industry navigates uncertain times. Civils starts are forecast to fall back 9% in 2023, following a decline in main contract awards and detailed planning approvals. However, sector activity continues to be supported by the delivery of major projects, including energy projects which will play a vital role in sector activity over the coming two years. These planned major projects are sure to bolster sector activity over the forecast period.”
More Details
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