Mace has issued a “stark” warning of slow growth in the sector in the wake of delayed major infrastructure projects.
by Rory Butler / March 30, 2023
The firm predicts the UK economy will shrink this year after narrowly avoiding recession in 2022 – and points to energy, labour, materials and supply chain pressures as persistent concerns for the sector.
It also points to revised timescales by the government for various major infrastructure programmes, such as HS2, as unsettling confidence in the sector, prior to the release of the National Infrastructure and Construction Pipeline report.
Those sentiments are echoed among certain economy experts in the sector too, such as Construction Products Association economics director, Noble Francis, who said the mishandling by government of major public schemes will lead to continued suffering in the construction supply chain.
Industry’s ability to invest in skills, deploy labour, and manage orders and scheduling on public contracts is being ‘constantly’ undermined by poor government planning, said Mr Francis.
Mr Francis also warned delays to major schemes like HS2 will hit both infrastructure and economic activity “in the near term and increase the cost of HS2 by billions in the medium term”.
While Mace points to no change in GDP in Q4 of 2022 as a predictor for economy shrinkage, its Cost Consultancy report shows resiliency with new infrastructure orders rising 23.9% in the same year.
New orders for electricity, highways, and the non-housing public sector also saw “significant growth”, the report states.
Mace’s tender price inflation forecast remains unchanged from its Q4 report, at 2.5% for 2023.
“That the economy didn’t fall into a recession at the end of last year is somewhat of a relief, but the challenges for the coming year remain stark,” said Andy Beard, global head of cost and commercial management, Mace Consult. “There were numerous insolvencies in 2022, and project teams will need to be alert to the risks these hold. The decision to review timescales for multiple large projects highlights the fragile nature of the industry.”
Adding: “While rising interest rates will have done little to help the precarious financial position of the supply chain, material costs starting to ease is welcome news. Lower energy prices should help some product prices slip further, although it might take some time before this fully feeds through, and prices will remain much higher than they were two years ago.”
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