Glenigan’s 2022-2023 Construction Industry Forecast: Sector on Course for Growth Despite Disruption Battles

Shows positivity with growth scheduled for next two years

• Value of underlying project starts (with a construction value of less than £100 million) expected to rise 11% on 2020 figures, up 3% on 2019 levels
• Public sector investment fuels recovery in social housing, health, and civil engineering
• Industry project-start values set to surpass pre-pandemic levels in 2022, rising by nearly a quarter (24%)
• Private housing rebound of 2021 continues with strong potential development pipeline
• Rise in office refurbishment work – office-starts set to surpass 2019 levels in 2023
• Belated post-pandemic recovery in Hotel & Leisure sector with project-starts set to grow 25% in 2022 and 17% in 2023 (compared to 2020 figures)

Glenigan, one the construction industry’s leading insight and intelligence experts, has released its widely anticipated Construction Industry Forecast 2021-2023.

Despite a challenging year, the sector looks set for growth with the value of underlying starts (projects with a construction value of less than £100 million) set to rise from £54.2 billion in 2021 to £61 billion by 2023 (11% higher than 2020 figures and up 3% on 2019 levels).

Containing a comprehensive overview of the current state of the construction industry, the forecast provides insights into predicted sector performance over the next two years.

Weathering the storm

Severe disruption by a dampened economy and post-Brexit has tempered the pace of recovery.

Yet the sector’s rebound is still on track, with recovery being driven by strong growth in industrial projects, increases in private and social residential activity and a delayed recovery for the Hotel and Leisure sector. The Government’s ‘leveling up’ agenda is also set to spur new development activity, particularly in the Midlands and North of England.

Private housing ‘mini-boom’ set to moderate

Following a ‘mini-boom’ of the housing market following the lift of the first national lockdown, property transactions and house prices rose sharply, driving demand for larger properties in market town and semi-rural locations. A temporary reduction on stamp duty rates provided further catalyst.

Yet despite weak household earnings, tax increases and higher mortgages taking their toll and moderating growth over the next two years, a 6% and 5% increase is expected for private residential starts in 2022 and 2023, respectively. 

Offering further optimism, the value of projects securing planning approval has improved every year since 2015 (bar 2018 when project-approvals fell slightly below 3%). The value of approvals also held up in 2020 despite the pandemic, rising 3%, and have remained firm in 2021 with an 8% rise in approvals (seasonally adjusted) during the ten months to October.

Major growth for Industry

The Marketing to Contractors & Housebuilders feature (which is sponsored by South East Construction Expo) in the Sectors section of our Directory provides an overview of the sector, including
details of its various media channels and events, together with access to our downloadable database of those with responsibility for procurement at key firms.

A success story of 2021 has been the Industrial sector. Following a sharp fall in project starts in 2020, with a value drop of nearly a third (29%) against 2019 figures, project-starts have recovered greatly in 2021, with the value forecast to increase by 33%. This trend is set to continue into 2022, with project-start values surpassing pre-pandemic figures and increasing by nearly a quarter (24%).

A continued surge in the warehousing and logistics sub-sector is also predicted, having been the strongest performing sector since 2018. Booming online sales have intensified the demand for logistics space.

Following anticipated growth of (49%) in 2021 against the previous year, warehousing and logistics work starting on-site is set to increase by a further 34% in 2022, followed by 2% in 2023.

Rebound planned for Hotel and Leisure

Having been hit particularly hard by the pandemic with repercussions still being felt throughout 2021, Hotel and Leisure project-starts have been estimated to have made just an 8% recovery this year. However, with the impending revival of the sector, investor confidence is expected to rise, leading to improvements of a quarter (25%) in 2022 and 17% in 2023.

Sustainability boosts Civil Engineering

Steady growth in project-starts for civil engineering is predicted throughout the forecast period. The Government’s drive to Net Zero has led to an increase in renewable energy projects, whilst major-projects have helped lift the sector’s overall workload.

Despite project-starts in 2021 remaining lower than anticipated with the value only forecast to increase 3% this year, a string of projects including the second Road Investment Strategy (RIS2), which will allocate £24 billion to build new road capacity as well as improve the quality of existing roads, is approaching the halfway stage. HS2 is also making a significant and crucial contribution to sector activity as work on Phase 1 continues.

Commenting on the Forecast, Glenigan Economic Director Allan Wilen said, “2021 has been a tumultuous year for trading across the wider UK economy, not just in the construction sector. However, the Forecast has shown just how resilient the industry is, with growth scheduled across many different sectors.

“While increased Government funding in line with the ‘levelling up’ agenda has been welcomed, the coming years will no doubt present their own challenges. Contractors and sub-contractors who seek to identify and mitigate any potential interruption to product supply will be best placed, especially as material and labour shortages are likely to increase cost pressures.

“But as we’ve seen time and time again, where there’s a will, there’s a way and as they stand, the figures look optimistic that growth for the sector can continue.”

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