Recession to hit construction until 2025

The construction industry is headed for hard times over the next year, according to the latest forecast by the Construction Products Association (CPA).

The trade body expects construction output to fall by 6.8% in 2023, similar to the 7% contraction forecast three months ago, before a further marginal fall of 0.3% in 2024.

This is a revision down from the 0.7% growth forecast in the summer due to a weaker economic backdrop. The CPA said then that the construction industry was headed towards an “acute recession”.

Although UK interest rates are now likely to have reached a peak that is lower than previous expectations, it is now anticipated they will remain at this level until 2025 due to inflation.

As a consequence, the UK economy is expected to flatline throughout 2024, holding back the recovery in major sectors of construction activity – such as new build housing and repair, maintenance and improvement – to 2025.

CPA Autumn Forecast Key Takeaways
Construction output falls by 6.8% in 2023 and 0.3% in 2024
Private housing output falls by 19% in 2023 and remains flat in 2024
Private housing repair, maintenance and improvement to fall by 11% in 2023 before remaining flat in 2024
Infrastructure output to fall by 0.5% in 2023 and by 0.1% in 2024
Industrial output to rise by 3.5% in 2023 before falling by 8.7% in 2024

Industry’s confidence weakened by cancelled projects

Output is now expected to fall marginally also in infrastructure as more roads projects appear likely to be pushed back or cancelled than anticipated only three months ago.

Nevertheless, the CPA said that activity will remain near the current high levels due to work continuing on major projects already down on the ground.

CPA head of construction research, Rebecca Larkin, said: “With infrastructure now set for two years of flatlining activity, it does shine a light on the importance of major projects as a driver of growth in the sector and for construction overall.

"In particular, government’s chopping and changing on infrastructure spending decisions this year has removed roads, rail and offshore wind projects from the near-term pipeline and has further weakened the industry’s confidence that government announcements can translate into tangible delivery.”

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