Construction industry predictions for 2023

Construction industry forecasts for 2023

Tom Hall, Chief Economist at Barbour ABI predicts slower later stage planning and construction activity, particularly in the commercially sensitive sectors as the economy slows. Likewise, Glenigan’s construction industry predictions for 2023 show that project starts will fall by 2%.

Read on for the 2023 construction industry predictions from data analysts and economists at Glenigan, Experian and Barbour ABI.


Glenigan’s predictions

Glenigan industry forecast for 2023 to 2024 shows that overall, project starts will slip back by 2% in 2023. Industrial, infrastructure, office starts and the education sector will provide brighter spots.

Growth in education project starts is expected to double

Glenigan predict a significant increase in project starts in the education sector after a poor performance in 2022. This remains in line with the October 2021 Spending Review. It revealed that the Department of Education’s annual capital budget will strengthen significantly over the next two years. The government’s programme to rebuild 500 schools in response to a predicted rise in school numbers has been slow to get going. However, there are around 300 school projects that have been prioritised (Glenigan Project ID: 14175517).

Warehouse construction projects will continue to bolster the industrial sector

Planning approvals for industrial projects were significantly higher in 2022 compared to the previous year. Similar to last year, industrial projects will provide a bright spot for construction in 2023.

There are firm development pipelines for the industrial sector thanks to:
• The growth of online business.
• Brexit and global supply chain problems which have encouraged businesses to hold more stock.
• Plus, there is a continuing strong demand for modern industrial space for manufacturers that is likely to support new orders in 2023.

Office starts provide another construction bright spot

Office starts are set to rise, particularly small to medium developments. There was a 4% increase in new office starts in 2022 and a further 5% expected this year. In addition to these new build projects, office refurbishment work is also predicted to increase. Glenigan highlighted that the office development pipeline looks ‘notably healthy’ in London, the East of England and Yorkshire & Humberside.


Major energy and infrastructure projects

Major projects boost civil engineering workload as the Government prioritises infrastructure and energy investment. This is partly because of new government measures to secure the UK’s energy independence. Read more about renewed nuclear program and Energy bill.

In January’s Barbour ABI’s Regional Review, the South East has the highest total of planning approvals for large infrastructure projects. This is followed by Yorkshire & Humberside and then the Midlands.

Consumer related construction projects will be suppressed

The current spike in inflation, higher taxes, and rising mortgage costs are expected to constrain activity in consumer related areas in 2023, such as retail, and hotel & leisure. Although interestingly, Glenigan also recently claimed that the immediate outlook for the housing construction activity has been largely undisturbed despite the house market uncertainty.

Barbour ABI Predict Slower Activity

2023 may well see slower activity, particularly in commercially sensitive sectors, as the economy slows, according to Barbour ABI.

In the January Snap Analysis, Barbour ABI highlight that 2022 contract awards were another record-breaker for the industrial sector with £11.6bn down to warehousing. The Barbour ABI’s future expectation of the industrial sector remains low risk, following the same prediction as Glenigan analysts.

It’s hard to predict how the construction industry will react in 2023

Looking at the year ahead, it is ‘hard to predict the future at the moment’ according to Tom Hall, the Chief Economist at Barbour ABI. He continues to say that the real question is how much the construction industry will be effected by:

• The UK recession
• Cost of living crisis causing hardship for UK citizens
• Ongoing Brexit trade barriers
• Construction cost increases
• Tight labour market

Stable output for non-residential sectors – Predictions from Experian

Experian are forecasting a 1.7% dip in construction activity for 2023 before returning to modest 1.2% growth in 2024. This includes a near 7% fall in new housing work due to falling home prices over the next two years, the cost of living crisis and higher borrowing rates.
Experian’s construction industry predictions for 2023 claim that non-residential sectors should escape with stable output or even see sluggish growth. Plus, there is a backlog of new orders for prisons, defence and some new hospital work, according to Experian.
This less pessimistic outlook for 2023 contrasts with the Construction Products Association which predicts a sharper near 4% contraction in orders.


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