Mace is predicting weak growth to continue in 2024.<\/p>\n
The firm\u2019s consultancy arm has warned that the Bank of England\u2019s predictions of a flatlining economy, high interest rates and the fact that contractors have \u201calready squeezed margins as far as they can go\u201d means tender-price inflation will ease.<\/p>\n
In a market-view report covering the fourth quarter of 2023, Mace also says it expects the high number of insolvencies to continue into 2024.<\/p>\n
The report highlights a 3.9 per cent rise in new orders in the quarter compared with the one that preceded it. However, this still leaves them 20 per cent down on one year earlier, which is likely to hurt output in 2024.<\/p>\n
Mace also raises questions about the reliability of the regularly published Office for National Statistics (ONS) output figures for the sector.<\/p>\n
According to the ONS, output in the third quarter of 2023 was 6.4 per cent larger than in the fourth quarter of 2019. However, the report notes, employment numbers have not returned to pre-pandemic levels.<\/p>\n
\u201cShort of a substantial improvement in productivity, it isn\u2019t easy to explain how the industry is producing more with fewer workers.<\/p>\n
\u201cSimilarly, there are good reasons as to why insolvencies are so high but continued industry growth is not one of them,\u201d it says.<\/p>\n
Mace global head of cost and commercial management Andy Beard said that 2024 looks like it will be \u201canother tricky 12 months\u201d.<\/p>\n
He added: \u201cWhile interest rates are likely to have now reached their peak, the expectation is that they will only start to come down gradually in the second half of next year.<\/p>\n
\u201cHigher borrowing costs are having a significant impact on a number of sectors, most notably housing, and these challenges will persist for some time.<\/p>\n
\u201cBy making it harder to secure credit, the Bank of England has contributed to one of this year\u2019s biggest problems for construction, which has been the high number of insolvencies.\u201d<\/p>\n
Beard said that with interest rates remaining high, insolvencies are likely to remain a problem and that supply-chain management should be treated as a priority by consultants, clients other companies.<\/p>\n
The report was prepared prior to the surprise fall in inflation announced by the ONS on 20 December 2023. Inflation fell to 3.9 per cent in November from 4.6 per cent in October, according to the public statistics body.<\/p>\n
The announcement prompted some commentators to predict interest rates could be cut faster than previously planned.<\/p>\n
Pantheon Macroeconomics chief UK economist Samuel Tombs told BBC News<\/a><\/em>: \u201cNovember\u2019s surprisingly sharp fall in CPI inflation reinforces the likelihood that the [Bank\u2019s] Monetary Policy Committee will begin to reduce the Bank Rate in the first half of 2024, far earlier than it has been prepared to signal so far.\u201d<\/p>\n