Despite the current challenges, the new UK Construction Industry Forecast 2024-2026 from Glenigan suggests a brighter outlook for construction in line with a strengthening economy in HY 2024.
The insight and intelligence specialist for the construction sector says that the key takeaway from its new Forecast, which focuses on the next three years (2024-2026), is that the industry will continue to 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, according to Glenigan, signals 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
The report notes that 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.
In addition, the General Election has also affected the pipeline of public-sector construction projects. The 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 such as the Lower Thames Crossing.
Starts on the up
However, it contends that “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.
Further, 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.
Glenigan’s Economic Director Allan Wilen commented: “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. In the private housing sector, for example, we anticipate starts will pick up in the latter half of this year, driven by improved affordability and brighter economic prospects.
“Similarly, we’re forecasting improved activity in consumer-related verticals such as retail and hotel & leisure, as a gradual easing in price inflation is set to provide a boost to households’ spending power. Elsewhere, structural changes are expected to create new opportunities in office refurb and fit-out, while logistics is poised for renewed investment fuelled by online retail growth.”
Allan acknowledges the General Election will have a significant upfront impact on industry performance, particularly in the public sector. He said: “Public-funded investment is expected to stagnate in the near term. The election has disrupted the progress of many projects, with the purdah period leading up to the 4th of July preventing civil servants from making any announcements that could influence voting intentions.
“As a result, decisions will be delayed until post-election. For example, the Department for Transport has already announced that ministerial decisions on several major projects, including the Lower Thames Crossing, have been pushed back by six months. This means we’ll have to wait until the new Government’s Spending Review for further clarity on budget allocation, and this might not be until Q.4 2024.”
Click here to download a free copy of the new UK Construction Industry Forecast 2024-2026 from Glenigan.
