Construction insights company, Glenigan, has predicted an industry increase of 12% in the UK in 2024 and 3% in 2025. With a shaky couple of years in the UK due to stalled economic growth and higher interest rates, this report is welcomed as a positive projection for the construction industry.
Its UK Construction Industry Forecast 2023-2025 forecasts the state of the industry for the next three years (2023-2025) in the wake of significant challenges within construction. The industry has already seen some extremely difficult conditions economically after the industry suffered an 18% decline in 2023.
UK construction decline may subside with economic growth
This report arrives in the wake of The Office for National Statistics confirming that UK construction output fell 0.6% in April 2023, which ultimately raised concerns about the demand for work.
However, Glenigan are more optimistic about the near-future for the industry, despite a recent industry decline due to material and labour supply shortages. It states that a strengthening in project-starts is expected at the start of 2024 as UK economic growth is expected to return. This will be supported by a pick-up in household spending and greater business investments, according to the report.
Also highlighted is that the delivery of existing and planned major capital projects will also have a significant influence on industry activity over the forecast period. In particular, the decision to delay HS2 construction will ultimately reduce its contribution to sector workload during this time, according to the report.
Glenigan has acknowledged that the industry has faced a challenging environment this year. It states that “stalled” UK economic growth and higher interest rates are set to dampen private sector investment and housing market activity further before improvements start to show.
According to the report, project-starts dropped sharply following last October’s mini-budget and as interest rates rose sharply. The value of starts also fell 38% in the first four months of 2023 compared with the same period in 2022. Whilst starts are expected to stabilise during the second half of the year, they are also forecast to be 18% down on last year.
It cites the post-pandemic recovery in project-starts lost momentum during 2022. However, Glenigan forecast that a strengthening in project-starts is anticipated from 2024 as UK economic growth is expected to return, which it suggests will be supported by a pick-up in household spending and business investments.
According to Glenigan, the supply-side disruptions are now also easing. Whilst material costs remain high, it claims that greater price stability in the coming months will provide clients and contractors with more certainty when costing and planning projects during the forecast period. It is great to see some hope emerging in the wake of some rocky months for those within construction.
Commenting on the Forecast, Glenigan’s Economic Director Allan Wilen said to KHL Group: “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, but there’s light at the end of the tunnel.
“Structural changes are expected to create new opportunities in logistics, office and retail refurbishment and fit out, and the repurposing of redundant commercial premises. Firms will need to be responsive and adaptable to identify these growth areas and exploit new opportunities as they emerge over the next three years.”
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