Social housing starts predicted to remain flat for the rest of the year

Overall, UK construction starts fell sharply during the first four months of this year, as the fall-out from last year’s Mini Budget and a weak outlook dented investor and consumer confidence.

Glenigan pointed out that the ongoing conflict in Eastern Europe, materials shortages and cost inflation, alongside spiking interest rates, are expected to delay work moving to site for the remainder of the year, with an 18% drop predicted.

Despite a tough start to the year and conditions remaining hard during the final six months of 2023, renewed construction growth is forecast for 2024 and 2025.

Public sector construction is expected to be a relative bright spot during 2023, as government departmental capital programmes are boosted by underspend rollover into the current financial year.

Although the run-up to the next general election is likely to disrupt project starts as a new administration looks to review and consolidate public sector investment programmes currently in the works.

Allan Wilen, economics director at Glenigan, said: “The pattern of UK construction activity is being reshaped by economic slowdown and structural changes, while new regulations are transforming how projects are delivered.

“We are still in a state of extreme uncertainty, and the industry is set for a challenging period over the coming year.

“Higher construction costs are expected to constrain social housing starts for the duration of 2023, despite increased funding for affordable housing.

“Additionally, the slowdown in the private housing market will have a knock-on effect on opportunities for associations to move forward with larger, mixed-tenure developments in partnership with other developers.

“However, growth is forecast to accelerate next year as housing associations press on with their development plans, while a brighter economic outlook should also increase the viability of mixed tenure sites.”