Construction output not expected to return to growth until 2024

The construction industry is expected to struggle in the face of challenging macroeconomic conditions through to 2024, according to Glenigan’s UK Construction Industry Forecast 2023-2024.

The industry monitor is predicting construction output will decline by -2% during 2022 and 2023, before a strong recovery in 2024, with 6% growth anticipated.

Glenigan predicts the next 24 months to be a challenging period for the construction industry, with ongoing material, labour, and energy supply chain disruption continuing to hold back activity for the foreseeable future. The post-pandemic bounce back for the sector has also lost considerable momentum.

Inflation, rising interest rates, and stalled economic growth has now begun to affect the pipeline of future work, with tightened consumer spending and rising mortgage costs further hurting private housing, retail and leisure schemes.

Among the bright spots over the next two years, include investment by discount supermarkets Aldi and Lidl to expand their reach, while office refurbishment projects in response to changing working trends are also expected to rise. NHS capital funding is also expected to rise during the period, leading Glenigan to be optimistic for health sector schemes.

Commenting on the Forecast, Glenigan’s economic director Allan Wilen said,

“Construction will face a challenging environment in the coming year as the Russia-Ukraine war continues to hinder the UK’s post-Covid recovery, exacerbating supply chain disruption, resulting in materials and energy shortages, and leading to cost inflation and dented market confidence.

“The pattern of UK construction activity is being reshaped by economic slowdown, but structural changes are expected to create new opportunities in warehouse & logistics, office refurbishment and new housing schemes. Going forward, it will be crucial for firms to be responsive and adaptable in order to mitigate risks in the current marketplace and exploit new opportunities as they emerge over the forecast period.”