NACF Market Intelligence Reports
2023 Q4 Report
Overview
Inflation, recession, and stagnation!
Will there ever be a return to the type of growth seen before the economic crisis of the late 2000s?
With 2023’s Q3 and Q4 output data sending the UK into a technical recession, there is not a great deal of light at the end of the tunnel. With the Bank of England forecasting just 0.25% economic growth in 2024 and 0.75% in 2025, there is no sign of the economic growth needed to boost badly stretched public finances.
There are however some positives to be taken from the situation. For the first time since we entered into the pandemic period, industry is reporting high confidence in the predictability of both price and availability of labour and materials, as below-inflation building cost rises translate into a real-terms decrease across the marketplace.
According to the ONS Construction Output report, overall demand dropped 1.3% over Q4 2023. There was a marked contrast between new build (down 5%) and repair and maintenance (which increased by 4.0%).
Insolvency is seen as a key risk in the coming year – a 5.1% year-on-year increase in construction insolvencies continues an upward trend, up 36.0% overall in 2019.
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NACF supply chains report that employment remains relatively constant but the outlook is deteriorating – it is felt that housebuilding will be the bellwether – optimism of the market will dictate growth rates.
Recently, the RICS reported that housing demand remains weak but that a small easing in rates has improved the outlook slightly, predicting a return to growth activity levels by the end of 2024, underpinning site activity and unlocking new developments (particularly important for those responsible for the delivery of S106 infrastructure).
NACF suppliers reported a notable decrease in demand for tower cranes, confirming a move to refurbishment from new build, and of maintenance work taking a larger market share, as client defer large capital projects.
Pressure on public sector budgets looks set to continue for at last the length of this parliament, with The Institute for Fiscal Studies quoted as saying that spending on public services will be cut by around £20bn under the recent Budget.
With many factors at play, but activity levels stagnant across the board, materials availability remains stable.
A developing risk on buyers horizon is the current disruption of trade routes due to global political instability; with 20% of construction material imports coming from China this remains something to watch.
