A fifth less construction work will start on site this year than last, a report has warned.
Industry economists warned that the dip in activity created by the stagnant economy would take more than 24 months to recover from.
Analyst Glenigan said just £60.7bn of new work will get underway in 2023, excluding individual megaprojects that would skew the statistics.
This will be down from £75.8bn last year, with gradual growth taking the UK back to only £70.4bn in 2025, according to the closely watched forecast.
New private-housing work is predicted to drop by almost a quarter this year, with the retail, office and industrial sectors suffering even greater falls.
Only education starts will have risen in 2023, according to the report, with the overall industry seeing 20 per cent less starts on site by underlying value.
Although all parts of construction will then enjoy rising levels of new work throughout 2024, and most of them will in 2025, this will not be enough to return to 2022 levels, the report said.
The latest forecast represents a worsening of the immediate outlook for the hard-hit industry, with Glenigan this summer predicting an 18 per cent drop this year followed by a strong 12 per cent rebound in 2024.
Today’s report said: “Weak economic growth and sharply higher interest rates have prompted some clients and developers to pause or scale back on planned investments.
“The value of projects securing detailed planning consent dropped by 10 per cent during the first nine months of 2023, extending an 8 per cent decline last year. Main contract awards have also fallen back in recent months, being 11 per cent lower during the third quarter of 2023 than a year earlier.”
However, Glenigan economic director Allan Wilen called for modest optimism.
“After sharp falls in starts and a challenging set of economic circumstances in 2023, construction can expect gradual improvement in market conditions over the next two years,” he said.
“Interest rates now appear to be at their peak, and a gradual easing in rates from 2024 should help to rebuild private investor and homebuyer confidence and lift private sector activity.
“As the industry emerges from the current downturn, structural changes are also providing opportunities in non-residential verticals such as warehousing and logistics, office refurbishment and fit-out, and the repurposing of redundant commercial premises.
“Near term, increased government funding is expected to drive education, health, and community and amenity starts, although budgets are likely to be reviewed post-election, potentially tempering activity during 2025.
“Going forward, the industry will need to target these new areas of opportunity but be adaptable to shifting conditions and moving targets, ensuring they have the expertise and resources to increase their exposure to growing markets and locations wherever they arise.”
