Construction output will contract by 8 per cent this year due to a sharp fall in housing work, according to PwC.
The multinational consultancy said residential output will suffer a 21 per cent drop this year, due to the impact of interest rates. It added that construction of commercial projects will also drop this year, while industrial and infrastructure work are expected to grow.
PwC engineering and construction sector leader Paul Sloman said: “As the path to homeownership becomes even more complicated for UK consumers, today’s figures prove concerning reading.
“With the cost of borrowing for mortgages now at its highest level since 2008, it follows that fewer sales enquiries and slower decision-making among prospective homeowners would be the result.”
The report suggests that fewer housing starts are exacerbating cashflow problems for contractors, noting the high number of insolvencies in the past year.
Despite the grim outlook for 2023, the report forecasts a return to construction output growth in 2024 and 2025 – with a rate of 2.1 per cent and 3.7 per cent respectively.
Overall construction output has seen sluggish growth in real terms since 2019, largely due to Covid and inflation.
The report also anticipates an end to a boom in industrial building. The sector saw a whopping 42 per cent output growth in 2022 but, according to PwC, a fall in consumer demand resulting from overbuilding will cause output to dip by 5.5 per cent in 2024. Industrial output is expected to stabilise the following year.
Infrastructure output looks set to trend upwards, with at least 3 per cent growth predicted for each year from 2023-25. The UK infrastructure pipeline has been buoyed by major projects such as HS2 and Hinkley Point C, and a push towards decarbonisation.
The analysis also suggests that consumers are continuing to spend on repairs and maintenance, an area that has proved surprisingly resilient amid recent market shocks.