2022 begins with a positive outlook for construction

In January there were some very positive signs for the construction industry. The latest ONS report on construction output showed a 3.5% increase in terms of volume in November, the largest monthly rise since March 2021. This strong performance means that the November output for the whole industry was 1.3% above the February 2020 pre-pandemic level and represented the highest level of construction output since September 2019.

However, there were differences between, and even within the sectors. For example, in the repair, maintenance and improvement (RM&I) sector, public housing RM&I is still below the pre-pandemic level, while both private housing and non-housing RM&I exceeded the February 2020 level in early 2021 and has remained above that level ever since.

Looking ahead, the winter edition of the CPA’s quarterly forecasts predicts that construction output will grow by 4.3% in 2022 and 2.5% in 2023. This compares to the 13.3% growth recorded in 2021 as the industry rebounded from the initial impact of the pandemic.

According to the forecast, infrastructure will be one of the main driving forces with an expected growth of 9.7% in 2022 and 1.1% in 2023. This would take the infrastructure sector to a new all-time high. The CPA notes that this robust prediction is despite delays on a number of major projects and the continued, although less acute, material shortages.

The housing sector also looks set to contribute to the expansion in output with 3% growth expected for both 2022 and 2023. This is based on most housebuilders reporting strong demand and profits. The CPA attributes this to the ‘race for space’ among homeowners and the demand for housing in affordable areas of the UK.

In addition, the CPA forecasts that the private RM&I sector will remain at the record high level of activity achieved in 2021 but will not grow significantly due to rising costs and high inflation making some homeowners more cautious.

Despite this generally positive news, the CPA also notes that supply issues remain the biggest challenge to growth and are likely to affect small businesses more severely than larger organisations. The nature of their work means that major housebuilders and main contractors can plan ahead more easily and obtain the materials they need.

The outlook for the construction industry in 2022 and beyond is positive. With supply chain issues lessening and strong demand within housing and infrastructure, it seems there is reason for cautious optimism.