UK Construction Industry May Face Tough Times In 2023

Various reports doing the rounds in the construction industry circles have projected gloomy times ahead. The industry's poor showing is primarily because of the challenging economic conditions the country has been facing for quite some time now. As construction costs shoot up, the demand for new projects is plunging. Construction sector specialist Glenigan has predicted a two percent fall in most types of construction projects from 2023. It is pertinent to note, that an eight percent growth was anticipated for the industry in 2023 last summer. The two percent drop is in the value of underlying starts, according to Glenigan. This category does not consider projects worth more than 100m

The cost-of-living crisis and the consequent reduction in consumer expenditure, are the core reasons affecting the retail sector in the construction industry.

The cost-of-living crisis and the consequent reduction in consumer expenditure, are the core reasons affecting the retail sector in the construction industry.

Contractors and subcontractors will have to be careful when looking for work this winter. When there is less about, the temptation is there to be extra-keen with your prices, but the way costs are rising creates a danger in doing that, says the Economics Director at Glenigan, Allan Wilen. From 2024, we are hopeful that the economy will be in a better place and the industry will be strengthening.

The momentum in the construction activity has come down dramatically, according to the Royal Institution of Chartered Surveyors (RICS), which revealed that there has been a big loss of momentum in construction activity as a whole. Only eight percent of surveyors recently polled by RICS were positive about an increase in overall workloads in the next 12 months. The dampening demand has not diminished the problems related to the supply of housing products. According to the Department for Business, Energy, and Industrial Strategy, the price of construction products rose in September after a brief lull in August. The cost of construction commodities such as bricks and timber is also expected to increase in 2023.

Private residential projects will also see a drop in activity in 2023, because of reduced household incomes, an increase in mortgage rates, and the unavailability of affordable homes. But not everything in the construction sector will be gloomy in 2023. Infrastructure is expected to be a bright spot, with new work expected to get underway in 2023. According to Glenigan, the investment migration from the capital to the regions will continue in 2023. London, Scotland, Wales, and the North West are all expected to witness an increase in new projects next year. The leveling-up agenda has a vital role to play in this development.

RICS also expects the workloads to rise in 2023.

RICS also expects the workloads to rise in 2023.

RICS chief economist Simon Rubinsohn said: The deteriorating macro environment is taking a toll on the construction industry, with access to credit now being cited as a key challenge for businesses, alongside the more familiar issues around building materials and labor. Indeed, the RICS metric capturing the extent of skill shortages in the sector has barely budged in recent quarters with quantity surveyors and a range of skilled trades in particularly short supply.

The economic outlook shift, will most likely impact the commercial and residential sectors. Workloads are expected to remain flat in 2023. Ongoing major projects will provide infrastructure support. A significant rise in the cost of materials, across all project types, was seen last year, with August providing some respite. In 2023, products such as ready-mixed concrete, thermal and acoustic insulating materials, and metal doors and windows are all expected to cost more. The UK construction industry hopes that PM Rishi Sunak will bring about economic and political stability, allowing the industry to turn around.