The latest UK Construction Industry Forecast from Glenigan has been released and shows a brighter outlook for the industry in the latter part of 2024 following a period of short-term challenges.
The forecast for 2024-2026 from one of the construction industry’s leading insight and intelligence experts, shows that the construction industry will face near-term challenges including weak economic growth, high interest rates and disruptions caused by the General Election. These factors are expected to further constrain private sector investment and delay public sector projects.
However, the outlook brightens over the forecast period. The early election will reduce political uncertainty, while a strengthening economy is expected to boost consumer and business confidence from H2 2024.
This signals a recovery in the not-so-distant future, with a modest increase in project starts predicted in the latter half of 2024 lifting starts by 3% this year. As the economy picks up further in 2025, Glenigan forecasts 7% growth, and 6% in 2026.
Disruption stifles short-term growth
Construction starts have remained sluggish during the first six months of 2024, as high interest rates and a weak economic outlook dented investor and consumer confidence.
The General Election has also affected the pipeline of public sector construction projects. The pre-election purdah period has disrupted the progress of public funded projects, while decisions will also be delayed post-election as the new government reviews existing programmes.
Starts on the up
However, an easing in borrowing costs and improved economic conditions – with the UK economy forecast to grow around 0.8% in 2024 – together with greater political certainty, should help to lift investor confidence from the second half of 2024 and into next year.
Despite a tough start, renewed growth in project starts is forecast for H2 2024. The gradual easing of interest rates is also expected to feed through to lift housing market activity from the second half of this year.
Furthermore, the Spending Review will set out the new government’s funding commitments and priorities and is expected to strengthen public sector construction activity during the second half of the forecast period.
Private housing set to rebound
Housing market activity fell sharply in 2023, with the value of project starts dipping 11% as housebuilders reacted to weakening market conditions and more stringent building regulations.
Private housing starts are predicted to experience slow growth over the forecast period, with Glenigan predicting a 2% rise in 2024 as the market environment gradually picks up. An increase in mortgage approvals in March 2024 (the highest in 18 months) points to a strengthening in house sales in the coming months.
Renewed project starts recovery is also anticipated in the second half of the forecast period, rising 14% in 2025 and 6% in 2026, as interest rates dip and consumer confidence improves.
Glenigan’s economic director Allan Wilen, said, “The UK construction sector is still facing significant headwinds as the economy struggles to pick back up. However, there are signs of growth in several key areas, particularly in the private verticals, signalling a gradual recovery from mid-2024.”
“Improving affordability due to rising wages and potentially lower mortgage rates are expected to boost consumer confidence and support a progressive recovery in private housing project starts over the next three years. This will enable housebuilders to respond to improved consumer confidence and a strengthening in property transactions by opening new sites and increasing construction activity.”
These forecasts are built upon the analysis of Glenigan’s database of current and planned construction projects, which have been examined alongside other market and economic variables.
