Construction forecast to fall by nearly 4% next year

The big downward revision from -0.4% forecast in the summer is mainly due to the impact of a wider economic recession, exacerbated by the effect of the ‘mini Budget’, and the consequent fallout from recent political uncertainty.

The wider uncertainty around the UK economy means that demand for private housing new build and private housing repair, maintenance, and improvement is expected to fall.

Other key construction sectors such as commercial and infrastructure are also expected to be affected by increasing concerns over construction cost inflation, which are likely to hinder project viability.

Key points


• Industrial output to rise by 20.4% in 2022 and a further 3.1% in 2023 before falling by 1.5% in 2024

• Infrastructure output to increase 5.2% in 2022, 1.6% in 2023 and 2.6% in 2024

• Private housing output rises by 3.0% in 2022 before a 9.0% fall in 2023 and recovering by 1.0% in 2024

• Private housing repair, maintenance and improvement to fall by 4.0% in 2022 and 9.0% in 2023 before growth of 1.0% in 2024

Professor Noble Francis, CPA economics director, said: “With the UK economy expected to fall into recession, the construction industry will also fall into a recession.

“It is worth keeping in mind that activity in the industry currently remains at a historically high level, but it will not be immune to the effects of falling real wages and spending at the same time as the cost of construction continues to rise at double-digit rates.

“The largest effects will unsurprisingly be on private housing and private housing rm&i, given that they are reliant on households’ willingness and ability to spend.

“Activity in both sectors will fall significantly, albeit from a high point. Major clients’ willingness to invest in new commercial developments will also be tested given concern over the UK economy and rising construction costs.

“Furthermore, infrastructure will be adversely affected by central government and local authority spending constraints as well as increased pressure for austerity despite continual government announcements and reannouncements of more and more infrastructure.”

 

 

Leave a comment