Several regions of the United Kingdom are still experiencing a decrease in the construction industry due to the Covid-19 pandemic. However, experts believe that a positive turnaround will likely happen in 2024.
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Prolonged Decline in UK Construction
Glenigan, a source of industry intelligence, revealed that the estimated worth of projects in the last quarter of 2023 was much lower when compared to the value of projects that were getting underway at the end of 2022. Since the initial COVID lockdown in 2020, the UK witnessed the lowest level of underlying starts in the construction industry, excluding very large or minor programs of any rolling quarter.
During the fourth quarter of 2023, the value of housing projects that were entering the construction phase reportedly experienced a decline of 8% compared to the previous year, while the civil sector experienced a drop of 26%. On the other hand, the retail industry experienced a growth of 6%, while the community and amenity sector saw an increase of 28%.
Allan Wilen, the director of economics at Glenigan, stated that even considering the wind-down after Christmas, the number of new starts pushed up a bit during these three months. One of the factors that contributed to this was a slight increase in the number of private housing projects, which suggests that contractors may be approaching the new year with newly found confidence.
Moreover, S&P Global Market Intelligence's director of economics, Tim Moore, noted that survey participants continued to express concern regarding the overall economic forecast for the United Kingdom, particularly as it pertained to the future of commercial construction. Nevertheless, it would appear that construction companies' confidence levels have been supported by the perception that interest rates will continue to decline in the coming months.
According to the information gathered in December, 41% of construction enterprises anticipate an increase in business activity for the year 2024, while just 17% anticipate a drop in business activity. This was in contrast to the prevailing negative sentiment observed during the same period last year.
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Construction Industry Forecast in 2024
Based on the strengthened trends identified in Glenigans recent Construction Industry Forecast 2024-25, private sector construction is expected to receive an increase from the new year's forecasts for reduced interest rates due to the recent decline in inflation, which dropped to 3.9% in the year ending November. When it comes to publicly sponsored construction, particularly social housing, the potential of a general election this year and a renewed political focus on housing shortages are both positive developments.
In addition, the report also indicated that the industry could anticipate an increase of 8% in the number of underlying project starts that are less than £100 million or almost $130 Million in 2024 and an additional 7% in 2025.
On the other hand, some of the industry's bright spots, which are indicated in these forecasts for 2024, have had their prospects improve due to recent changes. These bright spots include office refurbishment, particularly in London, and civil engineering, education, health, and industrial.
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