A new roadmap of the construction industry could signpost opportunities for investment over the next four years – while keeping firms on the right track in the long term.
The UK Construction Market Report analyses industry size and trends from 2018 to 2022 – and forecasts growth prospects up to 2027, by sector and project type.
It attempts to predict how sectors will perform over the next four years (and beyond) based on various factors, including resilience, public and private investment, the economy, and their respective statistical data.
It focuses primarily on commercial, industrial, infrastructure, institutional, residential, and energy and utilities markets, and is produced by London data analytics company, GlobalData.
And, having taken a nearly decade-long market view, it identifies a handful of key indicators that could help industry leaders make informed decisions about the direction of their companies.
Let’s find out what those are…
Context and key players
The UK construction market was valued at $467.8 billion in 2022 and is expected to achieve an average annual growth rate (AAGR) of more than 2% from 2024 to 2027 – putting its estimated new market value at $505.25 billion.
Investments in transport, energy, housing, health, education, and telecommunications infrastructure, safeguarded by a “certain” capital investment by the UK Government over the next five years, will drive this growth, said GlobalData.
Balfour Beatty was the leading contractor in the UK construction market in 2022, followed by Vinci SA, Actividades de Construccion y Servicios SA, Kier Group, Royal Volker Wessels Stevin NV, Skanska, Bouygues, SYSTRA, Costain, and McAlpine.
AECOM was the leading consultant, followed by WSP Global, SNC-Lavalin Group, Arup, Jacobs, Mott MacDonald, RPS Group, Tetra Tech, Arcadis, and Grimshaw Architects.
Sector performance – 2018-2022
Residential
The residential sector was the largest in the UK construction market in 2022, followed by commercial and infrastructure. This growth was due to low interest rates and high demand for new housing in recent years. Recovery from the pandemic downturn also saw sharp rises in renovation and refurbishment contracts.
Due to high costs and rising interest rates in 2023, GlobalData expects to see output fall this year, before bouncing back from 2025 due to government-backed affordable housing schemes and retrofitting.
Project types: single-family and multi-family housing.
Commercial
Though a relatively safe market until 2022, GlobalData anticipates a fuller recovery by the commercial sector from 2024.
It expects data centres, logistics developments, retail, office, and leisure and hospitality projects to see the bulk of investment.
Further, a rise in value of orders for office schemes is ‘expected to drive the growth in the sector over the coming years’.
Project types: leisure and hospitality, office, retail.
Infrastructure
Road and rail infrastructure investment (construction and renovation contracts) will be drivers of sector output over the forecast period (2024 to 2027), said GlobalData.
The National Infrastructure and Construction Pipeline 2021 has government backing up to 2030, with transportation projects seeing public investment between 2021 and 2025.
In his Spring Budget in March, chancellor Jeremy Hunt pledged funding to boost infrastructure growth, including £200 million for pothole repairs in England, £400 million towards Levelling Up projects, 12 new UK Investment Zones, and £20 billion for Carbon Capture and Storage (CCS).
However, though the UK National Infrastructure Programme could be the “key to industry growth”, according to cost management consultant, Currie & Brown, it is dependent on labour, and the current skills shortage could hamper delivery.
Project types: rail, road, major infrastructure.
Energy and utilities
The forecast in this sector to 2027 is largely underpinned by various pledges by the UK Government, set out in its Autumn (2022) and Spring (2023) budgets.
GlobalData expects to see growth driven by major schemes, including:
- Carbon Capture and Storage development over 20 years
- Private finance for the new Sizewell C nuclear power plant
- Electricity generation by wind and solar projects by 2035
- 40GW of offshore wind capacity by 2030
The UK Government has pledged to decarbonise all sectors of the UK economy to meet its net zero target by 2050.
Project types: electricity and power, oil and gas, telecommunications, sewage, water.
Industrial
GlobalData forecasts “high output of the sector” throughout 2023 and 2024 due to government investment in 12 new UK Investment Zones, which will see £80 million allocated for each zone for five years. This in turn will see growth in the project types listed below, likely located in the new Investment Zones.
Project types: chemical and pharmaceutical, manufacturing, metal and material production and processing, waste processing.
Institutional
“The relatively positive outlook of the sector reflects the recent rise in the total value of orders awarded for the construction of education and healthcare building, coupled with the government’s focus on the health, education and research sectors,” said GlobalData.
In the healthcare construction market, the UK Government has pledged to build 40 new hospital sites in England by 2030, as part of its New Hospital Programme (NHP).
Project types: educational, healthcare, institutional, research, religious buildings.
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