The past two years have been chaotic for the construction industry. From Brexit hampering supply chains to the COVID pandemic halting or severely impacting work across much of the industry, many construction firms have had to adapt and improvise to survive.
As an award-winning provider of construction ERP software, at RedSky we make sure we keep a finger on the industry’s pulse. Here we share our key projected trends for the construction industry in 2023.
1. Housing Market Instability
Since 2020, when the stamp duty cut was scrapped, house prices have risen nearly 21% nationally. This sharp rise, coupled with a recent continuing trend noticed by RICS (Royal Institute of Chartered Surveyors) Residential Market Survey of slowed new buyer enquiries, has led to an uncertain and unstable housing market. Similarly, the Bank of England’s latest agent’s summary suggests that commercial property is seeing similar problems “Contacts said investor demand had softened across all property types, in particular against a backdrop of rising interest rates. For example, vacancy rates in retail properties had started to increase.”
An uncertain and unstable housing market slows construction down, especially for repairs and renovations on recently purchased homes. It does potentially mean, however, that people may be more likely to do substantial renovations on their current homes rather than selling up.
However, with a recession and cost of living crisis estimated to cause severe issues for the next two years, the instability in the housing market is likely to be exacerbated.
2. Changing Infrastructure
Infrastructure across the country is rapidly changing. With fibre being installed in many rural communities now, BT retiring their copper PSTN lines and the requirement for electric car charging, the nature of what house building and large scale upgrades now include will inevitably affect construction.
From adapting to new technologies, to changing how houses are prepared for future infrastructure, construction teams are having to adapt to these different measures. It might be as simple as installing electric car charging ports in an enclosed garage, or as complex as designing homes with built-in Wi-Fi hotspots.
3. Increased Building Safety Measures
With the Royal Assent of the Building Safety Act being granted in April of 2022, there is a continuing intense focus on the safety of buildings, especially high-rise residential properties.
While the change of legislation and regulatory bodies is still ongoing, and will inevitably develop over the next 2-5 years, there is still an onus now to begin to adopt new ways of working to ensure the continual safety of residents.
Both retrofit work and new builds are being scrutinised, and measures such as digitised audit trails are being encouraged before invariably being enforced in the future.
In 2023, these safety measures will ramp up rollout. April 2023 sees the registration opening for existing occupied High-rise Residential Buildings (HRB). Then in October, we see the registration deadline for HRBs, the inspector and control approver registers opening, BSR (Building Safety Regulator) becoming the official building control authority, and the beginning of applying for approval before any work commences.
4. Cost of Living
The ongoing cost of living crisis is forcing households to ration heating, reduce their disposable spend and utilise their savings. These measures have meant a reduction in spend, which has begun to impact the construction industry and will likely do so for some time.
It’s estimated that the overall construction industry will see output reduced by 2-4% which is partially due to the cost of living crisis. For certain areas, especially in residential, the main work may be on insulation, installation of energy saving measures or even emergency repair works.
Lower incomes coupled with rising inflation on construction goods will affect smaller works and maintenance tasks, although commercial work may remain at a more consistent level, as well as housebuilding.
5. Reduced Construction Output
As mentioned above, there is a significant concern over the forecasts for lowered construction output. Work is at an all time high, with 12.9% of output growth in 2021, lowering to 2% output growth in 2022 (estimations from the ONS/Construction Products Association).
However, the forecasts for 2023 show a forecast of negative growth, with output shrinking at a rate of 3.9%. This forecast is only estimated to last through 2023, and 2024 shows a slightly positive output growth of 1.5%.
These negative forecasts reflect the ongoing cost of living crisis, cost of import due to Brexit taxes and duties, as well as delayed deliveries if using high street delivery services. Numerous factors will affect construction output, and weathering the next year or two will be paramount to the success of construction firms.
6. Focus on Productivity within Projects
Within construction projects, companies will be looking to maximise efficiency and productivity to improve overall profit forecasts and ensure the reduction in unnecessary spend. While these measures won’t reduce the cost of living crisis, small measures made will help to reduce the impact of a recession on the industry.
Recent news suggests that there could be as many as 100 construction firms a week going bust, with unpaid bills and bad debt largely to blame. This could lead to up to 6,000 firms gone within the year, causing a problem when the industry begins to bounce back come 2024.
By adopting technology, especially construction technology that allows for financial reporting and cost value reconciliation, construction teams can create efficiencies in working.
Productivity can also come from accurate workforce planning and rota management. By ensuring the right people are on site when it is needed, and not more than necessary, you can ensure that you are being as productive as possible every day on site.
RedSky is Here for Whatever Happens in 2023
Whether you need support in managing a flurry of new projects, or want to make sure that you are working as efficiently as possible on existing projects, speak to one of our advisers about how our ERP software can help you this coming year.
