The UK economic headwinds are gathering strength as we approach the end of 2022. The war in Ukraine and post-Covid challenges are driving up inflation, interest rates, and household bills. It is a deeply challenging situation for all sectors – and construction is no exception. But is the tale all doom and gloom for the industry? Or are there some rays of light as we look ahead to 2023?
The challenge of imports and exports
One challenge for construction firms – like those in other sectors – is the supply of materials. In the wake of Covid-19, there was a significant disruption to global supply chains. Some materials fell into short supply. As a result, projects faced delays and costs were pushed up.
Now, there’s the added problem of volatile foreign exchange rates. This may be good for traders who profit through spread betting on the markets. But it means major challenges for companies who import and export goods – and lack certainty over their future financial forecasts.
Construction workers in short supply
It is possible to point at the pandemic for some of the challenges facing the sector. The depth of available construction talent is one of them. In the UK, however, it is made worse due to tighter immigration controls that have been introduced in the wake of Brexit.
As such, the sector now has a talent shortage. In Q2 2022, six-in-10 members of the Federation of Master Builders said jobs had been delayed due to a lack of skilled workers. The prospects for this squeeze coming to an end any time soon do not look entirely promising.
A growth in output bucking the trend?
In spite of these challenges, the construction sector did see an increase in output this year. The official statistics show that output in September 2022 hit its highest monthly level since records began in January 2010. At a time when the wider UK economy was looking set for recession, it’s encouraging to see the construction sector move in the right direction.
The prospects looking ahead to 2023
From that, however, the question is for how long can the sector uphold that performance? With households tightening their belts and government seeking spending cuts, the looming recession is going to have an impact. How severe that impact remains to be seen as we enter a new year with previous challenges still to be addressed in terms of supply chains and labour shortages.
Amid the turbulent conditions the UK now finds itself in, there are predictions that the downturn facing the construction sector will not be prolonged. The hope is that growth will return in 2024; fuelled by the ongoing demand for new housing, public infrastructure projects (HS2), and other capital initiatives. For now, though, it’ll be hard hats at the ready for the bumpy months ahead.