A fifth less construction work will start this year than last year, a report has warned.
Economists in the sector warned that the drop in activity created by the stagnant economy would take more than 24 months to recover.
Analyst Glenigan said just £60.7bn of new work would start in 2023, excluding individual mega-projects which would skew the statistics.
That will be down from £75.8bn last year, with gradual growth taking the UK back to just £70.4bn by 2025, according to the closely watched forecast.
New private housing starts are expected to fall by almost a quarter this year, with the retail, office and industrial sectors expected to suffer even bigger falls.
According to the report, only education startups will have increased by 2023, and the overall industry will see 20% fewer startups in place by underlying value.
While all parts of construction will enjoy increasing levels of new construction throughout 2024, and most of it will in 2025, this will not be enough to return to 2022 levels, according to the report.
The latest forecast represents a worsening of the immediate outlook for the hardest-hit industry, with Glenigan this summer predicting a fall of 18% this year, followed by a sharp 12% rebound in 2024.
Today’s report said: “Weak economic growth and much higher interest rates have caused some customers and developers to stop or scale back planned investments.
“The value of projects securing detailed planning consent fell by 10 per cent in the first nine months of 2023, extending a decline of 8 per cent last year. Major contract awards have also fallen by recent months, being 11 percent lower in the third quarter of 2023 than a year earlier.”
However, Glenigan’s chief financial officer, Allan Wilen, called for modest optimism.
“After sharp declines in starts and a challenging set of economic circumstances in 2023, construction can expect a gradual improvement in market conditions over the next two years,” he said.
“Interest rates now appear to be at their peak, and a gradual reduction in rates from 2024 should help rebuild private investor and homebuyer confidence and boost private sector activity .
“As the industry emerges from the current recession, structural changes are also providing opportunities in non-residential verticals such as warehousing and logistics, office refurbishment and fit-out and the reuse of redundant retail premises.
“In the short term, increased government funding is expected to boost education, health and community and facilities starts, although budgets are likely to be revised after the election, which which could moderate activity during 2025.
“Going forward, the industry will need to target these new areas of opportunity but be adaptable to changing conditions and moving targets, ensuring they have the expertise and resources to increase their exposure to markets and locations growing wherever they arise.”
