UK construction output is predicted to fall by 4.7% this year with house building and RMI feared to be the worst hit before recovering with a marginal growth of just 0.6% next year, according to the newly published Construction Products Association’s Construction Industry Forecasts.
Private housing is predicted to be the sector most affected by the downturn, with output in 2023 forecast to experience an 11.0% fall as housebuilders focus on completing existing developments rather than starting new sites.
Plus, the report continues, there is now a less friendly government policy environment for housebuilders, given the end of Help to Buy, the Residential Property Developer Tax and the Building Safety Levy.
“Private housing RMI output was driven to historic high levels in 2021 due to increased working from home and a ‘race for space’”, the report continues, “With falling real wages, poor consumer confidence and double-digit construction cost inflation, many homeowners were quick to start delaying smaller, discretionary improvements work and output has been falling since March 2022. Larger improvements work, however, continued last year as households had pencilled in the finance for it at the start of 2022. Given further expected falls in real wages and increases in mortgage payments for many households this year, a further decline in private housing RMI output of 9.0% is forecast in 2023.
“…Unsurprisingly, however, one area of private housing RMI that continues to remain strong is energy-efficiency retrofit; given homeowner concerns over energy prices, insulation and solar panel installations activity is currently buoyant.”
CPA Economics Director Noble Francis summed up: “The construction industry has enjoyed a buoyant two years since the first national lockdown largely shuttered the industry back in Spring 2020 and activity still remains high for the moment. Overall, however, construction output is forecast to fall by 4.7% this year. It is worth keeping in mind the broader context that this is not 2008 and the decline is nowhere near the fall in output that occurred in the last recession. Looking back 15 years ago, construction output fell by 15.3% over two years during the global financial crisis.”
“Private housing and private housing RMI, two of the three largest construction sectors, are highly dependent on the wider UK economy, interest rates, real wages and consumer confidence. So, as the UK economy falls into recession, interest rates rise, real wages fall and consumer confidence remains poor, construction output will fall sharply in these sectors. These falls will be partially offset by continued growth in infrastructure but that means that it is more important than ever that government maintains its commitments to meeting its own targets by investing in levelling up, its infrastructure pipeline and transitioning to Net Zero.”
Construction Products Association
