Mace has released its Q4 Market View which includes analysis of ‘another poor quarter’ for the construction industry.
Although certain sectors have seen growth in terms of new work, there is weakness, largely down to the housing sector, with private housing output down 13.4 per cent from Q3 2022.
The wider economy is also struggling, with GDP flatlining in Q3 and forecasts for 2024 weak.
Although material prices have continued to ease slowly and were 1.1 per cent lower in Q3 compared with Q2, wage pressures and skills shortages are still prevalent, and rising insolvencies are reducing the number of available subcontractors, the report states.
The report also highlights the 3.9 per cent rise in new orders compared with Q3. However, this still leaves them 20 per cent down on this time last year, which is likely to hurt output in 2024.
With the detail around planning reforms announced in November’s Autumn Statement yet to be finalised, alongside the Office for Budget Responsibility forecasts for declining business and government investment in the longer term, the economic landscape for 2024 appears “increasingly uncertain”, said Mace.
“With forecasts pointing to ongoing weak economic growth, 2024 looks like it will be another tricky 12 months,” said Andy Beard, global head of cost and commercial management at Mace. “While interest rates are likely to have now reached their peak, the expectation is that they will only start to come down gradually in the second half of next year.
“Higher borrowing costs are having a significant impact on a number of sectors, most notably housing, and these challenges will persist for some time.
“By making it harder to secure credit, the Bank of England has contributed to one of this year’s biggest problems for construction, which has been the high number of insolvencies.
“Similarly, as the Monetary Policy Committee is unlikely to start easing interest rates any time soon, we expect insolvencies to remain a problem for projects.
“As a result, the importance of managing the supply chain must still be treated as a priority by consultants, as well as clients and the wider project team.”
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