Construction faces longer and deeper slowdown

Aaron Morby 9 months ago
Share

Consultant Arcadis is warning that construction now faces a longer and deeper slowdown than initially expected.

The firm is more downbeat about prospects for construction predicting that the expected 2024 recovery will be delayed.

Arcadis has downgraded its outlook because of the Government’s high interest rate policy, the growing cost of debt and an emerging slowdown in public project delivery.

In its latest Autumn report, Arcadis said sands appear to be shifting across the construction landscape, with a mixed bag of trading updates, evidence of restructuring and a disturbingly high level of business failures.

Simon Rawlinson, head of Strategic Research and Insight at Arcadis, said there were now concrete signs of a construction slowdown that was set to rock the sector, with new orders falling for the third consecutive quarter.

He said: “Conditions for our markets have deteriorated significantly over the summer.

“Borrowing costs are expected to remain high for the next two years and prospects for the investment economy including house building and commercial development are likely to be further downgraded.

“The unexpectedly rapid slowdown in public sector procurement is also a reminder that there are few safe havens for workload other than net-zero and fire-safety retrofit which still see strong demand.

“Our central prediction for the period from 2023 to 2025 remains low inflation, not deflation.

“However, in the light of worsening data, particularly in connection with the house building sector, we highlight that there is now a material downside risk of a competitive price correction in 2024.”

Arcadis is concerned about a drop in public sector ‘other new work’ such as health and education, which fell 33%, as well as a 27% decline in infrastructure new work.

These figures corroborate a recent National Audit Office report, which found the Department for Education was behind its initial schedule for awarding contracts on its 10-year programme of major rebuilding and refurbishment, having awarded just 24 contracts as of March 2023. This was well below its target of 83.

Rawlinson said the that construction was responding to the storms ahead by battening down the hatches, with contractors like Wates, Sir Robert McAlpine and BAM implementing restructures to create efficiencies and focus on sectors with a greater potential for growth.

Similar measures can be seen among housebuilders like Bellway, which is weighing up the potential closure of two divisions and a limited number of redundancies, whilst major brick manufacturer Forterra has outlined job losses following a restructure of its commercial and support operations.

These restructures come amid reports of disturbingly high level of business failures across the sector.

Latest data from the Government’s Insolvency Service showed there were 2,244 business failures in construction in England and Wales in the second quarter of 2023. That is the highest quarterly total since at least 2010 and way above the average quarterly total over the past 13 years (1,579).

The loss in industry capacity, alongside continuing high labour costs and core background national inflation, is expected to  contractors hold tender prices despite lower orders and general economic slowdown

Autumn Tender Price Forecast


Latest news

Former Crossrail boss Mark Wild to lead HS2

Wild to bear down on spiralling costs and bring rejigged scheme in on time
6 hours ago

Receivers in at £125m Manchester tower developer

Domis Construction walked away from scheme following doubts over funding
1 day ago

McAlpine pulls out of £55m Carlisle Citadels project

University of Cumbria starts hunt for replacement contractor
5 days ago

Strabag UK suffers further big trading loss

Austrian contractor is gearing up for major presence in the UK market
4 days ago

Durham Uni picks UPP for £130m student scheme

Firm will deliver 1,000 self-catered bed spaces
4 days ago

Architects now upbeat after 10-months of work gloom

Larger practices see rising workloads in next three months
4 days ago

Motorist dies after collision with road paver

Police Scotland investigating fatal crash
4 days ago

McLaren Living appoints HG Construction for £69m scheme

Build to Rent scheme will transform former vacant car park site in Leeds city centre
4 days ago

Squibb liquidator probes £2m of “missing” plant

Machinery, cars and scrap metal have disappeared at demolition specialist
5 days ago

Galliford Try to re-enter affordable homes market

Contractor sets out new five-year plan to build margin to 4%
5 days ago

Former Sellar chief to lead civils contractor Kilnbridge

Owen Dannatt joins as new CEO as founder Dermot McDermott becomes Chairman
5 days ago

Hunt starts for nuclear fusion plant construction partner

Fusion energy plant to be built at West Burton coal power station site.
5 days ago

National Grid raises £7bn for big infrastructure upgrade

Rights issue to fund a major round of capital investment in energy infrastructure
5 days ago

Grenfell police probe to last at least until end of 2025

19 companies and 58 individuals could eventually face charges
5 days ago

Mace confirmed on £100m London office retrofit

Work underway on Helical's 100 New Bridge Street job near Ludgate Circus
6 days ago

Wylfa chosen for next big nuclear power station build

Government names Anglesey site for a large-scale gigawatt nuclear power plant.
6 days ago

Bowmer & Kirkland trading profit halves

Contractor buys HVAC specialist Adcock despite challenging market
6 days ago

Piling specialist Van Elle plans further job cuts

Piling specialist plans further cost savings in face of lower demand
6 days ago

Civils contractor A Catlow files administration notice

High voltage cable specialist lodges court notice
6 days ago

Green light for ARC Oxford lab campus

Work to start later this year on £40m Ascent building job
6 days ago

Stonehenge tunnel hit by another legal delay

Court upholds latest appeal against £1.7bn scheme by campaigners
6 days ago

Plans go in for huge Olympic Park construction hub

Bow Goods Yard could deliver 3.5m tonnes of materials a year to sites across London
7 days ago

40% affordable homes target for Labour’s new towns

Labour pledges to select new town sites by end of first year
7 days ago

Plan for £100m Liverpool Baltic station

Construction work could begin next year
7 days ago

Surgo Construction went down owing £4.5m

Biggest creditor is Bellway Homes after dispute on housing job
7 days ago

Vistry seals £157m West London housing deal

Around 575 homes to be built at Merrick Place scheme in Ealing
7 days ago

Streamlined Watkin Jones returns to profit in first half

Multi-room specialist sees secured work pipeline hit £1.4bn
7 days ago

Bellway hires ex-brickie as group construction chief

James Griffin to oversee move to the Future Homes Standard and timber frame.
7 days ago

Persimmon under fire for delays to £10m relief road

West Suffolk Council serves Breach of Condition Notices after timetable slips again
7 days ago

BAM wins £33m Kent secondary school job

Replacement Swanley academy to be built at live school site
7 days ago

Contractor services