Construction output forecast to fall by 3.9% in 2023, says CPA

Construction output is forecast to fall by 3.9% in 2023 following a rise of 2.0% in 2022, according to the Construction Products Association (CPA).

The fall for 2023 is a sharp downward revision from -0.4% in the lower scenario of the CPA’s summer forecasts. 

This, says the CPA, is mainly due to the impact of a wider economic recession, exacerbated by the effect of the ‘mini-budget’, and the consequent fallout from recent political uncertainty.

The CPA are also forecasting that infrastructure should be the least affected by issues of household finances and rising interest rates. 

Nonetheless, says the CPA, it is not immune to the impacts of both sharp cost rises and government making clear that it will not increase departmental budgets to deal with rising costs. 

In the medium-term, the CPA are forecasting that projects towards the end of the UK government’s spending review will get pushed back into the next review. 

Councils, which are already financially constrained, are also expected to cut spending on new infrastructure projects and divert finance to cover the rising costs of basic repairs and maintenance. 

Overall, after 5.2% growth in 2022, infrastructure output is forecast to rise by 1.6% in 2023 and 2.6% in 2024. This, says the CPA, will be driven by larger projects already underway such as HS2, Hinkley Point C and Thames Tideway despite the cost overruns and delays.

The CPA is also forecasting that, after growth of 3.0% in 2022, private housing output is set to fall by 9.0% in 2023 before returning to 1.0% growth in 2024.

Overall, the CPA claim that given that construction output is expected to fall significantly over the next 12 months, it is critical that the UK government is focused on delivering its targets including 300,000 net additional homes per year, levelling up, and bringing forward infrastructure activity. 

Additionally, the CPA says that, as part of its movement towards net zero, the UK must prioritise the energy-efficiency of its new and existing homes.

Professor Noble Francis, CPA economics director, said: “With the UK economy expected to fall into recession, the construction industry will also fall into a recession. It is worth keeping in mind that activity in the industry currently remains at a historically high level, but it will not be immune to the effects of falling real wages and spending at the same time as the cost of construction continues to rise at double-digit rates.

“Infrastructure will be adversely affected by central government and local authority spending constraints as well as increased pressure for austerity despite continual government announcements and reannouncements of more and more infrastructure.”