Construction industry growth predictions for 2024

Construction industry statistics begin to stabilise after a sharp fall

The poorer economic outlook has prompted some clients and developers to pause or scale back on planned investments.

The value of projects securing detailed planning consent dropped by 8% during 2022 and remained weak during the first four months of 2023. During this period, main contract awards were 23% lower than a year ago.

Despite the sharp fall in statistics in the first 4 months of the year, there is a new level of stabilisation. Although consumer confidence, interest rates and household budgets continue to be affected.

The latest Glenigan forecast states that the construction industry, investor, and consumer confidence was affected by the mini budget, particularly in the private housing sector.

Industrial sector set for a rebound in 2024

Industrial was a star performer over the last few years, but it isn’t performing as well now. There has been a consolidation this year with rising interest rates and a subdued economic picture. 2023 is forecast to finish with a decline of -14% compared to last year.

The spring budget helped to stabilise investor confidence after the disruption and market turbulence sparked by Autumn’s mini budget. Currently, rising interest rates and weak retail spending are expected to dempen warehousing and logistics starts this year, before returning to growth over the medium term. Similarly, weak domestic and overseas demand is expected to temper manufacturing investment in new capacity and facilities this year, but the spring budget included tax measures for investment which should help to spur the recovery in business investment from 2024 according to the Glengian forecast. On another positive note, there is a recent dramatic rebound in industrial building consents which suggests that the sector is set to pick up over the coming quarters.

Retail & hospitality growth predictions for 2024

There is a squeeze on household budgets with the cost-of-living crisis which has impacted the amount of retail and hospitality projects. Plus, the sector is still recovering from fewer visitors since Covid began.

Construction in the retail sector has been affected with many businesses going online following a change in consumer habits.

Supermarket investment has increased, but some companies are reigning in their expansion plans lately.

Forecast to end with a 25% fall compared to 2022, however, Glenigan has forecast a 42% growth for next year.

Office construction continues to be affected by hybrid working

Offices are forecast to be down 11% this year, as hybrid working continues to affect the sector. However, with the type of accommodation changing there are some new opportunities for sustainable office construction projects.

The changes in the demand for higher performing offices has resulted in firms switching to more sustainable buildings. Reappraising existing estate to command higher office rent has resulted in a growth in remodelling, reshaping and fit out work.

Public sector: civil engineering on the decline

The Health and Education sector continue to do ok, but the civil engineering projects have been scaled back. Transport is set for a 9% drop in 2023 with the scale back and rephrasing of programmes such as HS2, due to budgets.
There is an18% dip, but there are improvements in the 2nd half of 2023. Glenigan recommend looking for direction in the green shots of the construction industry.

Political backdrop of the construction industry

In the Glenigan Forecast podcast, Arran Russel, Head of Content & Service at DeHavilland commented on the political environment mentioning ‘gloom for conservatives and SNP’. Rachel Reeves postponed the plans to borrow £28bn a year to invest in a green plan for the eco-friendly industry. The party’s leadership looks to review its spending to prove its fiscal credibility but promises that the fund will start in the first year of Labour’s government.

A green prosperity plan would bring inflation down. It is expected to be influenced by the green plans of other countries and consist of insulation for housing with a strong focus on social houses. There will also be a planning reform for a faster approvals process, particularly for energy and housing projects.

Growth is projected to rise gradually to 1 percent in 2024. Disinflation softens the hit to real incomes, and to average around 2 percent in 2025 and 2026. This is expected because of a projected easing in monetary and financial conditions.
In contrast, Rishi Sunak warns over a possible recession in 2024. Similarly, the bank of international settlements (BIS) claim that interest rates will need to remain high until 2027, while many governments will have to reduce spending and increase taxes to cool price growth.

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