Construction Industry Forecast (2023 – 2025)
We’ve just watched the Glenigan webinar providing a Construction Industry Forecast for 2023 – 2025 and thought we’d share the headline notes. As a specialist recruiter, we take great pride in staying up-to-date with construction trends. As we cover large parts of the supply chain, we can often spot trends early, so to save you time we’ve gone through the latest Glenningan report, and here are the key takeaways.
Construction Industry Forecast
Introduction
The 89% decline in project starts across the industry had the biggest impact out of all the matters discussed in the Construction Industry Forecast, described as being down to the turbulent economy in the first few months of the year. The 12% growth in project starts forecast for 2024 gave only cold comfort in comparison.
It was not all doom and gloom for the Construction Industry Forecast, however. Bright spots were reported. An upwards trend in retail, refurbishment and discount retail is predicted, with Hotel and Leisure also seeing an upward trend next year.
The public sector looks rosy with the public purse full due to budgetary underspend. Those working in this sector will have alternative obstacles – whilst projects are there to be won, they will only be available for those holding a Common Assessment Standard Accreditation (which replaces PAS91) and will also comply with the requirements of the Building Safety Act 2023.
Politics focussed on cutting the red tape around planning restrictions is also a hot topic in Government together with creating areas that communities can live in with an increased focus on good design. If these discussions reach fruition they will also stimulate the construction industry and economic growth and in turn, have a positive effect on the construction outlook over the next few years.
Breakdown by Sector
Housing
As widely reported, there has been a fall in the housing sector. Described as the result of not only interest rate rises, but also the frequency of those increasing rate changes. According to the Construction Industry Forecast, these two factors worked to not only reduce purchasers’ confidence in the housing market but also reduce their purchasing power. This sector was forecast to see modest growth next year, but this is dependent upon a sustained stabilisation of the economy. Politics appears to be in this sector’s favour as Labour is prioritising more social housing and home ownership.
During the Construction Industry Forecast presentation, a question was raised about whether housing developers should consider exploring different sectors to fill their order books, but that will depend on the sites they have. Following the pandemic, people are tending towards buying larger properties in areas with green spaces. There is also more demand for single-person occupancy.
Industrial (Manufacturing, Warehousing and Logistics)
This sector has experienced year-on-year growth since 2021 and this is forecast to continue into 2025. Whilst last year, a 40% growth in this sector was witnessed, going forward it’s thought that growth will be more modest hovering around the 14% mark.
Retail, Hotel and Leisure
This sector is exposed to the available income of its customers and accordingly, the squeeze on household budgets has been taking its toll, on top of an industry that has already experienced reduced customer spending as a result of the pandemic and lockdown. It is said that there will only be modest retail growth, as supermarkets reign back their investment activity. It’s hoped that as spending power improves, opportunity will start to flow through this sector during the second half of the forecast period.
Offices
With controversy surrounding the effectiveness of staff working from home, the only definite conclusion that can be derived at present is that there has been a reduced requirement for office accommodation and this sector has had to focus on office remodels and refurbishments. With employers turning against the work-from-home phenomenon on productivity grounds, this sector might see an upturn in 2024 and 2025, with an emphasis on upgrading and rebuilding properties in order that they meet environmental standards.
Public Sector
It’s been revealed that key government departments underspent last year and cash reserves have been rolled forward. Assisting the public sector to spend on key projects. It’s thought that the educational sector will benefit, perhaps with healthcare seeing the building of 40 new hospitals that was discussed but never materialised.
Civil Engineering
This sector experienced a weak start this year, following an overspend by the Department of Transport and a curtailment of projects such as HS2. Despite these dampeners, utilities are expected to be a potential area of growth.
Renewables and Wind Energy
The Ukraine war created a political shift towards renewable energy but this is not without its challenges. In order to unlock offshore renewal energy sites such as wind turbines, we need to first upgrade our existing networks to accommodate them. Network Grid is said to currently be under a lot of pressure to resolve this.
Summary
In summary, there will always be winners and losers in the various sectors of the Construction Industry, but the current Construction Industry Forecast shows us that the success of the Construction Industry is now more than ever dependent upon the economy.
If you would like to read more on this subject, check out our Construction Labour Market Analysis that we published in March this year: Construction Labour Market 2022: Helpful Analysis by Net Temps
News + Resources
