While the industry really hoped for a resurgence in the construction sector next year, recent predictions suggest that this rebound might not be on the horizon just yet. The Construction Index have reported that The Construction Products Association (CPA) recently amended its projections, highlighting a dip in the UK construction output growth by 0.3% for 2024, which contrasts their earlier, more optimistic forecasts. What this will mean for sub-contractor costs is yet to be seen.
EEBS Managing Director, Nick Pilgrim says, “We have to agree that although our customers initially bucked the trend, all sectors of the industry are now showing various degrees of slowing down. Sub-contractor costs in the domestic housing sector are definitely being scrutinised, but most other sectors are still reporting healthy order books. However this is most definitely not all bad news! Material costs appear to have either levelled off or dropped back a few percentage points, and the ongoing pressure for ever increasing subcontractor pay rates has very quickly been replaced by more realistic views.
There are, of course, concerns that main contractors or clients may try to ‘revisit’ agreed prices, but let’s hope that the current situation does not herald a return to the subby-bashing days of previous downturns.” In a sliver of good news, the 2023 forecast has been slightly improved. Instead of a grim 7.0% fall in construction output, the CPA now believes the figure will be a slightly less daunting 6.8%. This revision hinges on the belief that the UK’s interest rates have peaked, albeit at a lower point than earlier anticipated. The twist? These rates are expected to sustain for a more extended period, possibly until 2025, under the influence of continuous inflation.
How will unstable sub-contractor costs affect the industry?
Sub-contractor costs, often overlooked, play a pivotal role in these projections. With the construction industry relying heavily on sub-contractors, any fluctuations in their expenses can ripple across entire projects, affecting overall profitability and project timelines. So, what does this mean for the broader UK economy? A period of stagnation in 2024 seems inevitable. Major construction areas, especially new housing projects and repair, maintenance, and improvement (RMI) ventures, will likely see deferred growth till 2025. Despite earlier positivity, infrastructure growth, too, might experience a slight downturn, given that road projects might face potential delays or cancellations.