According to market watchers Barbour ABI, contracts awarded for construction projects in the UK fell from £80.4bn in 2022 to £69.2bn in 2023, despite the rampant tender price inflation.
The aggregate value of planning applications was also down, by 16%, to less than £100bn. Applications for new housing are now 21% down on pre-pandemic levels, according to Barbour ABI.
Barbour economist Kelly Forrest said: “2023 was challenging for the UK construction sector. In addition to viability challenges from higher construction costs and borrowing rates, consumers and business confidence remained weak.
“2023’s good news stories were largely confined to the public sector as the government’s flagship school and hospital building programmes finally started to build some momentum amid moderating cost inflation and mounting political pressure.”
Barbour ABI found that education awards bounced back to £6.1bn in 2023, up 20% on 2022, and 19% higher than pre-covid 2019.
New construction contract award sin the healthcare sector in 2023 were 4% higher than in 2022 and 160% higher than pre-pandemic levels.
Kelly Forrest said that the energy sector was also “a particular bright spot as investment poured into energy from waste and energy storage facilities, along with offshore wind”.
Overall, however, infrastructure contract awards fell 22% in 2023 to £15.2bn but remained 47% higher than in 2019.
Forrest concluded: “In early 2024 there are a few reasons to be optimistic. Interest rates are likely to have peaked and inflationary pressures have eased markedly. Entering what is very likely to be an election year there is a risk there will be a hiatus in public sector investment as key decisions are postponed. The speed and resilience of the private sector recovery will be pivotal.”