Glenigan says confidence recovering on hopes that interest rates have peaked

The construction industry will continue to struggle in the face of economic challenges but output is forecast to grow by 15% in the next two years.

Glenigan’s UK Construction Industry Forecast 2023-2025 suggests the rest of this year will be dominated by cautious private sector investment and a housing market slowdown.

It predicts a decline across most non-residential sectors during the rest of this year amid weak UK economic growth and high interest rates, with project-starts falling 20%.

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Glenigan said interest rate rises seem to have peaked

But it said there will be growth in 2024 of 8% and a further 7% in 2025, claiming that a firm development pipeline is already supporting a rise in industrial and office starts.

“After sharp falls in starts and a challenging set of economic circumstances in 2023, construction can expect gradual improvement in market conditions over the next two years,” Glenigan’s economic director Allan Wilen said.

“Interest rates now appear to be at their peak, and a gradual easing in rates from 2024 should help to rebuild private investors’ and homebuyers’ confidence and lift private sector activity.”

It said planning consents have declined 10% during the first nine months of 2023 and main contract awards also dipped 11% in the third quarter of this year than the same time a year ago.

Meanwhile, the latest analysis from Barbour ABI said the final quarter of 2023 got off to a lacklustre start in terms of construction spending on new contract awards. The data firm said awards totalled £5.3bn in October, down more than a third year-on-year.

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