UK construction – what can we expect in 2024?

Last year was a challenging time for many industries, as the UK continued to feel the effects of the cost-of-living crisis. With its already narrow profit margins, the construction industry suffered particularly from rising costs, with construction output price growth hitting record levels of 10.4% year-on-year in May 2022. Now, with 2024 well and truly underway, what’s in store for the construction industry?

Reasons to be optimistic

Data indicates growth

The pressures on the UK property market had a knock-on effect on the housebuilding sector in 2023, with total construction new orders decreasing in the first half of the year. However, this figure rose by 3.9% in Q3, suggesting a slow but steady recovery. Output also increased, albeit marginally, as ONS recorded a rise of 0.4% in the month of September.

Interest rates expected to reduce

The Bank of England has held the base rate at 5.25% since August and, as inflation fell markedly in 2023, many experts believe that interest rates will finally start to drop this year. This would decrease the cost of borrowing and, in turn, would likely increase buyer demand for new homes. And it’s not just the Bank Rate that is expected to peak this year – it is unlikely that labour and material costs will increase further either, thus alleviating some of the financial pressures on construction companies.

Possible demand from the education sector

The Department for Education’s School Rebuilding Programme aims to refurbish or rebuild hundreds of schools across the country by the end of this decade. Since the scheme was first announced in 2020, serious concerns have been raised over the safety of school and college buildings containing ‘crumbling’ RAAC (reinforced autoclaved aerated concrete). The Rebuilding Programme is therefore more necessary than ever, and the construction industry will be crucial to updating and making the UK’s schools safe once more.

Digitisation to increase?

According to a study by RationalStat, the global construction management software market is set to grow by 15% by 2028. This suggests there is increased interest in using digital tools to streamline and manage construction projects, thus improving efficiency and efficacy. The Deputy General Manager of Smart Construction commented, “We are now seeing businesses of all sizes investing in smart technology”. He added, “at the close of a tumultuous year for inflation, savings are more important than ever and precise calculations are made possible by accurate insight and data collection.”

2024 is also likely to see many developments in automation, which is an ever-changing aspect of the technological world. Whilst many are concerned that this will reduce the need for manual labour, others are positive it will make processes safer and more sustainable without causing people to lose their jobs.

Causes for concern

Labour shortage

One of the biggest challenges for the construction industry last year was the skills shortage, with the UK Trade Skills Index 2023 identifying that 937,000 new recruits will be needed over the next 10 years. This is partly due to EU workers leaving the UK and many of the remaining workforce being over the age of 50. More apprenticeships will be crucial to narrowing the skills gap, yet £1.3 million of the government’s apprenticeship levy went unspent in 2020-21.

General election

The next election must take place by 28^th January 2025; however, there is some speculation it could be held as early as May this year. The Labour and Conservative parties have very different stances on housing and housebuilding, meaning there is uncertainty about what the near future holds for the industry. For example, Labour have voiced plans to invest in social housing if they are voted into government, so the focus could move away from schemes such as the First Homes initiative.