Forecasters now warn construction recession to last to 2025

Aaron Morby 8 months ago

Forecasters have downgraded the expected construction recovery next year warning the industry is now set to remain in recession until the start of 2025.

High interest rates will continue to drag down housing activity with infrastructure and even industrial activity expected to slide in 2024.

The scale of next year’s contraction will be far less than this year’s expected 6.8% fall.

According to the influential Construction Products Association’s new Autumn forecast, contractors can expect a more moderate marginal fall of 0.3% in 2024 – but down from the 0.7% growth expected for next year that was being forecast just three months ago.

Downgraded forecast for next two years

Economist say UK interest rates are now anticipated to remain at this level for longer, until 2025, due to stubborn inflation.

This will write-off the previously expected recovery in private house building and housing RM&I.

Key points

• Construction output falls by 6.8% in 2023 and 0.3% in 2024

• Private housing output falls by 19% in 2023 and remain flat in 2024

• Private housing RM&It to fall by 11% in 2023 before remaining flat in 2024

• Infrastructure output to fall by 0.5% in 2023 and fall by 0.1% in 2024

• Industrial output to rise by 3.5% this year before dropping 8.7% in 2024

Infrastructure, output is now expected to fall marginally as more roads projects appear likely to be pushed back or cancelled than anticipated only three months ago.

Nevertheless, activity will remain near the current high levels as infrastructure activity remains strong down on the ground due to work continuing on major projects such as HS2 between Old Oak Common and Birmingham, the Thames Tideway Tunnel and Hinkley Point C.

Overall, infrastructure output is expected to fall by 0.5% in 2023, from its current high level, before remaining broadly flat (-0.1%) in 2024.

CPA Head of Construction Research, Rebecca Larkin said: “With only a couple of months left in a difficult year for construction and looking forward to 2024, the evidence suggests it will still be a while before the clouds begin to lift.

“Both new build housing and rm&i have taken a significant hit from rising interest rates, falling real wages and weak economic growth.

“Although further rises in interest rates now appear off the table, the prospect of rising oil prices keeping inflation elevated suggests rates are likely to remain at peak for longer and throughout next year.

“This will keep demand subdued for house purchases and improvements.”

She added: “It will also create a step-change in financing costs compared to the record-low rates of the past decade for new commercial and industrial projects that is likely to limit appetite for investment and development.

“With infrastructure now set for two years of flatlining activity, it does shine a light on the importance of major projects as a driver of growth in the sector and for construction overall.

“In particular, government’s chopping and changing on infrastructure spending decisions this year has removed roads, rail and offshore wind projects from the near-term pipeline and has further weakened the industry’s confidence that government announcements can translate into tangible delivery.”

Latest news

BAM plans another round of construction redundancies

Second round of redundancies in four months
2 hours ago

Ray O’Rourke steps down as chief executive

Son Cathal O’Rourke to head the Laing O'Rourke Group as new CEO
23 hours ago

ARJ Construction went down owing £9m to supply chain

Unsecured creditors can expect some money back for unpaid invoices
8 hours ago

CBRE and T&T to combine project management arms

New $3bn revenue PM giant employs 20,000 staff in over 60 countries.
17 hours ago

Multiplex starts London 36-storey ‘hanging gardens’ tower

Piling starts on Square Mile's £400m 50 Fenchurch Street tower
1 day ago

Eastern Green Link 1 looking for local suppliers

Subcontractors wanted for electrical superhighway scheme
8 hours ago

Caddick wins £10m Manchester college extension

Loreto Sixth Form College in Hulme to get new three-storey building
8 hours ago

Green insulation firm buys flooring contractor

Energystore acquires Advanced Traditional Screeding
9 hours ago

Birmingham to pick five firms for £265m homes retrofit plan

Firms to be charged annual fee to cover Council cost of promoting energy efficiency
1 day ago

Arup and Binnies to design Abingdon reservoir

Embankment trial will help consultants to draw up £1.5bn reservoir design
1 day ago

Subdued market sees profit warning from SIG

Insulation and building products supplier pushes back timing for market turnaround
1 day ago

Developer CLS to advance major new Vauxhall scheme

Citadel Place scheme will consist of 400 student rooms and 200 flats
1 day ago

Tarmac trials electric tipper truck

Pioneering EV tipper being put through its paces
1 day ago

Changing of the guard at HBF

Long-standing Chief Executive Stewart Baseley steps back to become chairman
1 day ago

Early bond release key to averting industry surety crisis

Contractors must put pressure on clients to release bonds promptly
4 days ago

Over 1000 building safety cladding retrofits completed

25% of safety retrofits finished seven years after Grenfell disaster
4 days ago

Steel import delays make Rangers miss kick-off

Construction work at Ibrox will not be finished by start of next season
5 days ago

Lidl looking for new contractors for store building plans

Sign up for events in Newcastle, Glasgow, Birmingham and Southampton
4 days ago

Utility firm GTC revs up for ground source heat pump era

Contractor and heat pump maker strikes ground-breaking deal
4 days ago

Amey switches kit supplier to Speedy from HSS

New plant and equipment hire deal worth £25m a year
5 days ago

Clients under spotlight after bond bombshell

Contractors call for action to avoid project delays
5 days ago

M&E specialist Lorne Stewart falls into the red

Parent group suffers £2.8m loss in face of cost inflation and insolvencies
5 days ago

Four men rushed to hospital after site accident

Eye-witnesses report a wall was knocked over on Edinburgh site
6 days ago

World’s tallest scissor lift set for UK sites

Hire Safe Solutions partners with Dingli to supply lift with working height of 37 metres
5 days ago

Barhale wins £36m East London sewer remediation

Northern Outfall Sewer in West Ham runs above railway lines in the city
5 days ago

Weston Homes thumbs-up for £220m Essex homes scheme

Colchester 600-home Viridis scheme gains outline consent
5 days ago

Balfour seals £192m deal for trio of Scottish substations

Work to start this summer to enhance electrical transmission in Argyll
6 days ago

Construction bond bombshell as major player quits market

QBE currently provides cover for 20 of the industry's 30 biggest contractors
6 days ago

United Utilities names another 18 winners for £2.7bn water spend

Water giant cuts out large management contractors in latest spending round
1 week ago

Green light for £130m Dundee Eden project

Former gasholder site to be transformed into green house
6 days ago

Contractor services