Industry Insights: How Will UK Construction fair in 2023?
The UK construction industry had a somewhat encouraging year in 2022, with only modest growth in both residential and non-residential building sectors. The government’s ongoing infrastructure investment and the continuing demand for new homes drove construction activity throughout the year. Despite ongoing economic uncertainty caused by the continuing pandemic and Brexit, the industry was able to maintain its momentum and even saw an increase in foreign investment.
Now, the UK construction industry is expected to experience a resurgence of some sort in growth by 2023, according to Glenigan’s latest forecast. Despite the fact that a predicted 2% decline in the number of projects starts in 2022, the industry is poised for a comeback in the following year. This marks a significant shift from earlier predictions, as Glenigan had previously forecasted an 8% increase in construction activity for 2023.
UK Construction Insights 2023: Will the Construction Industry See a Boom?
To say that the construction sector is not going to face a tough road ahead would be an understatement. After all, there are several factors contributing to a challenging environment. From rising inflation and taxes to rising mortgage costs, numerous internal factors will put a strain on consumer-related sectors like retail, housing, and leisure. Moreover, economic uncertainty caused by conflicts like the war in Ukraine could further hinder post-COVID recovery.
“The construction and electrical industries are expected to see steady growth in sustainable construction projects in the coming years.”
The construction industry’s private housing sector plays the biggest part, with a yearly turnover of 37 billion pounds. Right now, many major home builders are still selling homes, but that is expected to change in the near future. Recently, it has been predicted that interest rates will increase to 4%. This was already a concern as interest rates were expected to rise to 3%, but the announcement made it worse. As a result, it is expected that fewer homes will be sold and the prices of homes will decrease in the next year. Additionally, home builders will probably build fewer homes. After a 3% increase in 2022, it is now predicted that the private housing sector will decrease by 9% in 2023 before going back to a 1% increase in 2024.
Moreover, the labour shortage factor poses a challenge to both the trade industry and the country. The Construction Skills Network (CSN) report published by The Construction Industry Training Board (CITB) in mid-June 2022 states that there will be a demand for 53,200 additional construction workers in the UK construction industry by 2026, which is an increase from the previous year’s figure of 43,000.
Although infrastructure is typically considered a stable sector in Construction and should not be heavily impacted by issues such as household financial positions and interest rates, it may still be affected by rising costs and limited government funding. As price inflation remains a concern, this could decrease the volume of infrastructure projects being completed, with some being delayed or pushed back in the government’s spending review. Additionally, financially constrained councils may prioritize funding for repairs and maintenance over new infrastructure projects.
According to the construction industry forecast, overall project starts are expected to decline by 2%. However, it’s not all bad news, as the industry will still see some growth in the near future construction projects and implementation of new supply chain solutions, albeit at a significantly lower rate than previously predicted due to rising Construction, material, and energy costs.
Sustainability Could Boost UK Construction Industry
The construction and electrical industries are expected to see steady growth in sustainable construction projects in the coming years. This is largely driven by the UK Government’s commitment to achieving Net Zero emissions by 2050. As a result, there is an increasing demand for renewable energy projects such as wind and solar power. These projects could help reduce carbon emissions, create jobs, and boost economic growth. And then there is the build-to-rent construction market that has a strong development pipeline.
Additionally, the sector is also seeing an increase in workload due to the development of major projects such as transportation infrastructure, housing, and commercial buildings. This will also help drive the sector’s growth and provide a positive outlook for the future.
In A Nutshell: UK’S Construction Industry Will Grow But Face Obstacles
Despite some challenges facing the UK construction industry in 2023, including rising inflation and taxes, ongoing economic uncertainty caused by the ongoing pandemic and Brexit, labour shortage and limited government funding, the industry is still poised for upward growth. The ongoing demand for new homes, increased foreign investment, and the government’s commitment to sustainable construction projects will drive the industry forward and see the construction sector weather the storm.
Additionally, although the predicted 2% decline in the number of projects starts in 2022 may be cause for concern, the industry is expected to make a comeback in 2023 and steadily move towards a trajectory of upward growth. Furthermore, the construction industry is expected to see steady growth in sustainable construction projects in the coming years, creating jobs and boosting economic growth. So not everything is gloomy for the construction and electrical industries heading into 2023.