{"id":470570,"date":"2022-12-12T10:50:13","date_gmt":"2022-12-12T10:50:13","guid":{"rendered":"https:\/\/www.constructionnews.co.uk\/?p=470570"},"modified":"2022-12-09T17:24:52","modified_gmt":"2022-12-09T17:24:52","slug":"industry-set-for-downturn","status":"publish","type":"post","link":"https:\/\/www.constructionnews.co.uk\/consultants\/industry-set-for-downturn-12-12-2022\/","title":{"rendered":"Industry set for downturn"},"content":{"rendered":"

The sector is in a downturn and building will be hit harder than infrastructure, a consultancy has predicted.<\/span><\/p>\n

Arcadis\u2019 <\/span>Winter 2022 Market View<\/span><\/i><\/a> says inflation in construction tender prices for 2022 will prove to be 10 per cent for buildings and 12 per cent for infrastructure.<\/span><\/p>\n

Its forecast for 2023 has inflation in the cost of delivering projects falling to only 2 per cent for buildings, but to 6-7 per cent for infrastructure, although it warned that considerable uncertainty remains.<\/span><\/p>\n

Arcadis says inflation will be higher in infrastructure, reflecting the high volumes of investment that will be delivered \u2013 given continuing government investment \u2013 and the use of procurement practices such as \u2018early contractor involvement\u2019 that reduce competitive pressure on costs during the later stages of bidding.<\/span><\/p>\n

According to the consultancy, the UK construction market has reached a tipping point as the widely expected downturn arrives, but is entering it from a strong position, as the construction market has \u201ccontinued to avoid the gloom engulfing the wider economy so far, with output and new orders increasing in the third quarter of 2022\u201d and total new orders up by 6.4 per cent at \u00a3774m.<\/span><\/p>\n

\u201cAlthough markets cannot defy gravity forever, the strong order book represents a solid cushion of workload ahead of the slowdown, providing strong foundations for the eventual rebound,\u201d the report says.<\/span><\/p>\n

Looking beyond next year, Arcadis anticipates that infrastructure inflation in 2024 and 2025 will fall to 4 per cent, \u201cin part reflecting the much lower levels of inflation expected in wider markets\u201d, and 2 per cent for building in both London and regional markets.<\/span><\/p>\n

Simon Rawlinson, the firm\u2019s head of strategic research and insight, said: \u201cWith the chancellor shielding the public sector capital programme from market effects in the short term, our forecast is subject to even higher levels of uncertainty than usual.<\/span><\/p>\n

\u201cMany sectors, including infrastructure, industrial, and even non-housing repair and maintenance are entering the downturn from a position of record workload, and there is a chance that not all sectors will fall into recession.\u201d<\/span><\/p>\n

Rawlinson said input costs would continue to rise in 2023, but would not all be passed to clients.<\/span><\/p>\n

Ross Baylis, Arcadis\u2019 head of cost and commercial management, said: \u201cCompared to the previous downturn in 2007 and 2008, today construction markets are increasingly varied, meaning that commercial pressures are applied in very different ways.<\/span><\/p>\n

\u201cWith energy and labour costs still likely to be significant cost drivers in 2023, such variation in practice and procurement means that clients and their advisers will need to think even more carefully about how their bid strategy will share the cost and price tension across the wider project team.\u201d<\/span><\/p>\n

Arcadis forecasts that the industry\u2019s \u201cmissing workforce\u201d will be a key factor in how it responds to the downturn.<\/span><\/p>\n

Labour shortages are worsening, which means there will be less downward pressure on wages and so less of a fall in inflation than in previous business cycles.<\/span><\/p>\n

Even as workload peaked in the third quarter of this year, the workforce contracted by 2 per cent to 2.14 million and there has been a 25 per cent fall in the self-employed workforce since early 2019.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The sector is in a downturn and building will be hit harder than infrastructure, a consultancy has predicted. Arcadis\u2019 Winter 2022 Market View says inflation in construction tender prices for 2022 will prove to be 10 per cent for buildings and 12 per cent for infrastructure. Its forecast for 2023 has inflation in the cost …<\/p>\n","protected":false},"author":49170,"featured_media":383043,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[57172,552],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n