2023 in UK construction – what changed?
As Big Ben rang out on January 1, many in the UK construction industry were happy to see the back of 2023 given the challenges it brought.
With a surge in energy prices, fluctuating fuel prices and the soaring cost of raw materials, a lot of people felt a financial pinch.
That being said, 2023 did further prove that the construction industry is determined and there are things to take from 2023 that can be hugely beneficial.
In this article, we will cast our eye back to the previous 12 months and examine what came to light during that time.
A housing downturn led to problems
Perhaps the biggest issue of 2023 was the fact that interest rates skyrocketed, making life incredibly difficult for people up and down the country.
In December 2021, the interest rates were 0.1%, however by July 2023, they had shot up to a staggering 5% to combat rising prices elsewhere.
This was especially notable for those who had to remortgage, as they were discovering that their monthly rate had gone up by a huge amount. Over a million Brits saw their rates go up by £500, as per the BBC.
Those on fixed-term mortgages weren’t safe either, with the average rate of a two-year mortgage going up to 6.7% - which was a 15-year high.
The consequence of this was that as homes became unaffordable to many, people stopped buying. And if people aren’t buying homes, then there’s no point in building them, which was a hammer blow to the construction industry.
As per the BCIS, the ONS showed that new private housing work was down 2.8% in Q3 2023 compared to Q2 2023. More startlingly, it was 13.4% down on Q3 2022.
In addition, according to Barbour ABI, the amount of construction contracts in 2023 dropped from £80.4bn to £69.2bn, which is a huge drop.
The worry is that things will get worse before they get better on that front, with the BCIS believing that we won’t see significant growth again until 2025.
The impact on construction firms
4,287 construction firms became insolvent between September 2022 and September 2023, which was an alarming 8.3% increase from the year before.
The knock-on effect of this is huge, as it means people are out of work and projects will be impacted as there are fewer people on hand to do them.
However, there was no recession
One of the biggest fears for construction in 2023 was that the country would go into recession, which would’ve plunged the UK further into crisis.
Thankfully however, that was avoided – albeit narrowly. As a result, while things are still looking bleak in one aspect, it isn’t the total disaster that could’ve been.
The impact of a recession could’ve seen thousands of companies go out of business, in addition to the ones that sadly did go.
It also could’ve seen projects grind to a relative halt and while there is an element of that at present, it would’ve been much worse with a recession.
However, the industry remained resilient. So, as challenging as 2023 has been, there is still something to build from as we move further into 2024.
That being said, there is an early hurdle to clear in 2024, as additional import charges are stinging companies as a direct result of the ongoing crisis in the Red Sea.
The crisis is causing a delay in goods arriving, which is because of transportation following safer routes. However, this means fuel and insurance costs have gone up for transportation companies, which is something that we all have to contend with.
Hopefully brighter times on the horizon
As a result of 2023, the prospect of 2024 isn’t exactly vibrant and positive for the construction industry, but it’s far from a lost cause.
In fact, according to BCIS, just 13% of construction professionals believe that there will be a fall in workload in 2024, despite all the disruption.
The resilience shown to beat off all the threats of the recession will need to be displayed again in 2024, but the construction industry has long been known for its durability.
Hopefully, with interest rates now starting to fall, the housing situation will improve during 2024 and more projects can get up and running. That would be a huge and timely boost.
For now though, all we can do is dig in. To read more articles from Multifix about the construction industry and beyond, you can find our article library here.