Construction Intelligence Report Q4 2023

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In our latest Construction Intelligence Report report for UK and Ireland we've assumed a more sombre economic outlook.

As the world emerges from the events of the last three years, the UK is facing high consumer inflation, interest rate hikes and the rising cost of living, the major impact for the construction industry has been the fall in private housebuilding output in 2023.

Contractors are faced with the combination of the economic downturn causing a reduction in orders against the inflationary pressures caused by labour problems and a loss of capacity in the sector. Margins will likely be eroded as contractors look to secure turnover.

The construction forecast is now at 2.25% and tender price inflation is down from 2.50%. The remainder of 2023 will likely see a fall in output of between 5 – 7% removing the growth, since the start of 2020.

The forecast is for a minimal to modest construction recovery in 2024 and 2025. While 2024 output will be driven by committed public expenditure, from 2025 this increase is projected to come from private investment.

Construction inflation will continue although with improved material availability and falling demand it is reasonable to expect that inflation will be at historic levels. The latter part of 2023 has seen stability regarding material availability. With energy costs slipping and the large increases from previous years now falling out of the inflation tracker, coupled with decreased demand, has resulted in material discounting, and tempering of price increases.

It is expected that the squeeze on tender inflation witnessed in the second half of 2023 will continue through the first half of 2024 before the increase in tender price inflation commences in the second half of the year.

Labour costs will replace material costs as the main cost driver. For 2023 onwards the forecast includes the prediction that labour costs, driven by consumer inflation, are higher than material costs and this year’s wage agreements of around 7– 8% have been included. The report includes updates from sectors across the construction industry:

We examine the current state of modern methods of construction and ask is it really in a bad state?
The UK’s infrastructure landscape is changing, we explore the challenges ahead following demise of the Northern leg of HS2.
The Government has changed its policy on net zero and environmental targets, read about these changes in the Sustainability sector update.

Please find the full report here: Construction Intelligence Report Q4 2023

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Max Wilkes

Associate Director, UK contact form+44 7879 69 4215