Glenigan has launched UK Construction Industry Forecast 2022-2024.
The Forecast, which focuses on the next three years, suggests the construction industry will face challenging economic conditions. However, whilst growth will be stifled this year (2022 -2%), 2023 is predicted to see a modest 8% increase and a smaller 2% lift in 2024. This represents an average rise of 2.6% over the Forecast period.
The Glenigan report is predominantly focused on underlying starts (< £100m in value), unless otherwise stated, and contains a comprehensive overview of the current state of the construction industry. Crucially, it provides overall sector and vertical-specific insight into performance over the next few years.
Significant disruption stifles short-term growth
Containing a comprehensive overview of the sector, the report outlines how the next few years will be challenging for the construction industry as a whole. The war in the Ukraine is creating considerable economic uncertainty which is having a direct, current effect on output, derailing post-COVID recovery. As a result, overall project starts are forecast to slip back 2%.
Aside from this ongoing conflict, current inflation spikes, higher taxes and rising mortgage costs are expected to constrain activity in consumer-related areas, such as private housing, retail and hotel & leisure.
In contrast, “a firm development pipeline is predicted to lift industrial and office starts in 2022, as well as Government-funded areas such as education, health and community & amenity”. Furthermore, it contends that the value of project starts is expected to rise in 2023 as the UK economy stabilises and short-term supply chain pressure ease. However, “the lingering impact of higher construction, material and energy costs means this growth will be significantly lower than predicted in previous forecasts”.
Public Sector Pick-Up
Public sector investment is set to be an important driver for construction activity over the Forecast period. However, the latest Spending Review revealed only modest growth in capital funding for a handful of central Government departments over the next three years.
Whilst the value of social housing starts is set to dip almost 10% this year, following a 15% surge in 2021, the vertical is predicted to rally for the remainder of the Forecast period, helped by a strong pipeline of already approved projects commencing on site.
Education construction is a vertical predicted to grow significantly over the next few years (av. +8%), partly driven by the Government’s commitment to building 500 new schools over the next decade. This is supported by a modest rise in universities capital spending during the second half of the Forecast period
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