CONTRACTS awarded for construction projects in the UK fell 14% to £69.2 billion in 2023, according to analysis from Barbour ABI.
Sectors hit by the cost-of-living crisis were said to be particularly affected with residential housebuilding down 14%, commercial developments down 15%, and hotel and leisure falling 29%.
Barbour ABI revealed that a lack of confidence in the market was also reflected in applications for new construction projects, which fell by 16% to under £100 billion. Housing applications are now 21% down on pre-pandemic levels.
Kelly Forrest, Barbour consulting economist, said, “2023 was challenging for the UK construction sector. In addition to viability challenges from higher construction costs and borrowing rates, consumers and business confidence remained weak.
“2023’s good news stories were largely confined to the public sector as the government’s flagship school and hospital building programmes finally started to build some momentum amid moderating cost inflation and mounting political pressure.”
Barbour ABI found education awards bounced back to £6.1 billion in 2023 – a 20% increase on 2022 figures. Meanwhile, healthcare rose by 4%.
Kelly Forrest added, “Overall weakness concealed pockets of buoyant sub-sector activity. Energy was a particular bright spot as investment poured into energy from waste and energy storage facilities, along with offshore wind.”
Infrastructure spending, including government-funded projects, remained an important crutch for the industry in 2023. Contract awards fell 22% to £15.2 billion but remained 47% higher than in 2019.
Looking ahead, Forrest revealed there are a few reasons to be optimistic. “Interest rates are likely to have peaked and inflationary pressures have eased markedly. Entering what is very likely to be an election year there is a risk there will be a hiatus in public sector investment as key decisions are postponed. The speed and resilience of the private sector recovery will be pivotal.”
