Construction Industry Forecast: brighter than expected?
By Jon Vanstone, chair, Certass Trade Association
You’ll struggle to find anyone not feeling the brunt of the UK’s cost-of-living crisis. It’s hit everyone from homeowners to renters, fabricators to installers.
The wider economic impact of this is starting to make its effect known on our nation’s industry. Last year, the Construction Industry Forecast (CIF) predicted a decline of 4.7% for construction output, with the industry hopefully seeing a recovery of 0.6% growth going into 2024.
Already we’re seeing individual markets impacted massively by the downturn, particularly for new-builds and private housing. Although we’re seeing growth in other industrial markets such as infrastructure and energy-efficient installations as homeowners become more eco-conscious and undertake energy-saving measures like the installation of solar panels and electric vehicle chargers (EVCs).
Despite this, we are still seeing a small impact on the private housing sector. Expanding on last year’s forecast, the Construction Products Association has predicted construction output declining to hit lows of 11% in 2023. Although things are seeming less negative than first thought, with January’s output only decreasing by 1.4%, according to the Office for National Statistics.
There are a lot of reasons for this sort of depression in the industry’s economy. Developers’ focus is being drawn toward completing existing projects and developments, with homeowners taking up new projects at slower rates than usual, although the decline in output lacks the severity that we expected.
This isn’t being helped along by the end of schemes that strengthened the base of homeowners in this country who can invest in renovations and improvement projects for their homes. Help-to-buy is ending as Government introduces the less-than-helpful Residential Property Developer Tax and the Building Safety Levy, which means extra costs levied on those carrying the industry through these times.
Why is this happening?
Post-pandemic, we saw the amount of repair, maintenance, and improvement work (RMI) being undertaken reach historic highs.
Much of the country was working from home, and the social restrictions meant that homeowners had more disposable income than ever before. Homeowners were forced to spend more time in their homes. The combination of WFH and children being off school forced homeowners to reassess what they want from their living spaces.
Since that boom period has ceased, we’ve seen the industry plateau, which means that installers and fabricators must work harder to win new business, particularly with homeowners’ apprehensions to invest in more costly projects.
Figures from the Rated People Home Improvement Trends Report 2023 (HITR) show that 60% of homeowners will put off essential maintenance this year.
With the CIF forecasting further decreases in wages and an exponential growth of mortgage rates, which doesn’t seem to be slowing, recovery will begin to slow down. However, many companies are reporting aspects of their business performing well as they diversify their projects and expand into emerging markets. Particularly in terms of energy efficiency retrofit projects such as solar panels and the installation of EVCs. EVC installation rose by 169% in 2022 according to the HITR, and solar panel installation rose by 64%.
Similarly, infrastructure work is seeing a rise in popularity, particularly in the public sector, and 2022 was a major year for these sorts of projects. Hinkley Point, the Battersea Power Station, and the High Speed 2 (HS2) Railway have been major developments. This is expected to continue well into 2023, with further delays to HS2 announced by the Department for Transport in March.
What can we do?
Last month marked three years since the start of the first national lockdown, and in many ways, we’re still recovering and learning lessons from such a tumultuous period. This has also meant dealing with the inevitable downturn from the post-pandemic boom that so many of us enjoyed.
Although things are looking less than positive, we have to remember that this is not 2008. This isn’t a case of a crisis disrupting the sector, but an industry that is slowly returning itself to equilibrium following one of the most uncertain times that we’ve ever known.
We’re not seeing anything quite like the drops we experienced 15 years ago, where output fell by 15.3% over two years. We must remember that we’re hugely dependent on the UK’s wider economy and that our growths and losses will reflect the wider trends of the nation.
Things may be looking bleak, but this is no reason to despair. This sort of fluctuation is part and parcel of our industry. We’re still seeing growth in other sectors, which seems to reflect a shift in attitudes regarding what sort of work people are prioritising and undertaking in difficult times.
By holding firm, and continuing to deliver best practice work, we think that installers and fabricators can have another positive year. We’re a reactive industry, and as long as we remain stoic, we’ll weather any storm it can throw at us.