Construction output is forecast to fall by 3.9% in 2023 following a rise of 2.0% in 2022, predicts the Construction Products Association. This is an important development given the number of self-employed people in construction, plus the sector is often an indicator of the UK’s overall financial health. The fall predicted for 2023 is a sharp downward revision from -0.4% in the CPA’s last forecast, and is mainly due to the impact of a wider economic recession, exacerbated by the effect of the ‘Mini Budget’, and the consequent fallout from recent political uncertainty.
Their rationale in more detail is:
- After growth of 3.0% in 2022, rising interest rates and decreased mortgage availability mean that private housing output is now forecast to fall by 9.0% in 2023 before returning to 1.0% growth in 2024.
- Commercial output is forecast to remain flat in 2022 to complete current major projects in the pipeline, before a fall of 5.1% in 2023 due to accelerating costs and worsening economic prospects.
- Infrastructure is likely to be least affected. After 5.2% growth in 2022, it is forecast to rise by 1.6% in 2023 and 2.6% in 2024. This will be driven by larger projects already underway such as HS2, Hinkley Point C and Thames Tideway.
Professor Noble Francis, Economics Director at CPA said: “Activity in the industry currently remains at a historically high level, but it will not be immune to the effects of falling real wages and spending at the same time as the cost of construction continues to rise at double-digit rates. Major clients’ willingness to invest in new commercial developments will also be tested given concern over the UK economy and rising construction costs.”