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Industrial The construction industry continues to face many challenges including the cost of living crisis and wider economic and political uncertainty. Despite these Tom Hall , Chief Economist at Barbour ABI and AMA Research discusses some of the new industry records set in 2022 and Construction Products Association (CPA) reports its forecasts for 2023 – 2024. THE CONSTRUCTION INDUSTRY – NEWRECORDS ARE SET IN 2022 AND THE FORECASTS FOR 2023-2024 14 www.thefis.org T OM reported that the 2022 snap analysis conducted by Barbour ABI shone a light on some amazing results at a challenging time. Contract awards - 11,897 were awarded with the highest ever value of £80bn Contract awards hit a new record of £80.4bn in 2022 as high demand for construction continued in the face of many challenges including the cost of living crisis and wider economic and political uncertainty. Part of the increase is surely due to input cost increases inflating construction costs and the continued filling of a weak construction pipeline after pre-Brexit uncertainty and the Covid-19 pandemic. New overall records were achieved in the residential and industrial sectors; the latter has more than doubled since 2020 thanks to higher demand for warehousing resulting from Brexit and the ongoing move to online retail. The largest overall increase was in the infrastructure sector, rising by £6.0bn to £19.6bn and was mainly due to more renewable power generation projects. The commercial sector also had an excellent 2022 with £9.4bn, a 30% increase compared to 2020 - however lower than previous highs in 2014-15. The sector had an exceptional Q1 but has been weaker since. Elsewhere the hotel and leisure sector continued at slightly above-average levels and the healthcare sector fell back slightly but still experienced lots of new activity principally in major hospital refurbishment and extension. 2022 Highlights include: • 40% increase in contract awards since 2020 trough; 11% increase in 2022 • Infrastructure value rises by £6bn – the largest increase across sectors • Another new record for industrial with £11.6bn again down to warehousing • Residential increases by 8% to a new annual record • Education is the only sector at below average levels A new record for contract awards in 2022 demonstrates the high underlying demand for construction. With many of the UK’s economic indicators flashing red, 2023 may well see slower activity, particularly in commercially sensitive sectors, as the economy slows. See Figure 1. Planning approvals - 28,624 projects were approved with a new record value of £105bn Planning approvals achieved a new record in 2022 with £105bn, just beating 2016’s 103bn. However activity is very much two- speed. The infrastructure sector saw the highest value since 2013 with £27.8bn. The industrial sector smashed all records in 2022 thanks to warehousing – £15.4bn eclipses 2021’s £11.7bn and is double 2020 levels. However commercially sensitive sectors are significantly weaker; the residential TomHall, Chief Economist at Barbour ABI and AMA Research FIgure 1. Contract awards - Key information including sector breakdown FIgure 2. Planning approvals - Key information including sector breakdown Annual value (£bn) % change Relative Strength Index (RSI)* 2022 2021 2020 2022-21 2021-20 2022 2021 2020 All sectors 80.4 72.5 57.0 11% 27% 87 68 23 Residential 26.3 24.4 20.3 8% 20% 85 72 23 Infrastructure 19.6 13.6 14.5 44% -6% 72 39 44 Commercial & retail 9.4 8.7 7.3 9% 20% 88 55 33 Hotel, leisure & sport 5.3 5.4 3.1 -1% 71% 59 64 12 Industrial 11.6 10.9 5.5 7% 98% 87 100 42 Medical & healthcare 3.0 3.4 2.0 -11% 72% 76 97 57 Education 5.1 6.1 4.4 -18% 40% 38 56 20 Annual value (£bn) % change Relative Strength Index (RSI)* 2022 2021 2020 2022-21 2021-20 2022 2021 2020 All sectors 105.0 95.1 88.3 10% 8% 86 56 40 Residential 41.2 41.7 39.8 -1% 5% 33 37 39 Infrastructure 27.8 16.6 15.3 68% 8% 89 57 53 Commercial & retail 8.8 12.1 8.8 -27% 37% 21 56 11 Hotel, leisure & sport 5.7 6.6 10.1 -14% -34% 23 33 90 Industrial 15.4 11.7 7.8 32% 50% 98 100 65 Medical & healthcare 1.9 1.8 1.6 7% 14% 62 52 44 Education 4.2 4.6 4.8 -10% -4% 21 24 17