Learn About the Latest News on UK Construction Expenses Jump to 3.8%, Frustration Across Business as UK Recession and Building Slowdown Numbers Emerge and London Affordable Housing Construction Has Stalled

In today’s news, we will look into the prognosis that the expenses of building in the United Kingdom would increase by up to 3.8% this year. Meanwhile, there is a sense of frustration across the industry as new numbers show that the United Kingdom is experiencing a recession and a slowdown in construction. Additionally, the development of affordable homes in London has come to a complete halt.

Construction Expenses in the UK Could Jump 3.8% This Year

Original Source: UK construction costs forecast to rise by up to 3.8% this year

The increases will cost the National Infrastructure and Construction Pipeline £1.56bn, according to Currie & Brown.

Following a 4.1% increase in 2023, UK construction expenses are expected to grow 3–3.8% this year. Increases will force construction businesses to develop new methods and capacities to control costs and complete projects.

The findings are in a new analysis by cost management, project management, and advising firm Currie & Brown.

Cost hikes could affect UK important projects like the National Infrastructure and Construction Pipeline. The cost of delivering £82 billion in 2024, the equivalent of 30 new schools or three new major hospitals, may rise by £1.56 billion.

Unless quickly discovered and managed, such increases could delay pipeline projects or require significant rescoping.

The report urges project teams to act in these areas to handle uncertainty and save money:

Start using modular construction. This will mitigate local skills and materials shortages, reducing building cost uncertainty. Close communication between developers, consultants, and contractors will also clarify timetables to acquire competent workers early.

2: Be sustainable throughout. To ensure projects satisfy current and future standards, firms must assess their carbon footprint throughout development. Doing so will lower future investments for organizations. They will also reduce estate costs and carbon emissions sooner due to operating improvements.

3: Go digital. Digital technology like AI and advanced data analytics can boost project ROI and foresee and control future difficulties. Companies must be open to new technologies and collaborate to use them where they will offer the greatest value to projects.

Currie & Brown Chief Operating Officer, UK and Europe, Nick Grey, says: “Cost escalation is a major challenge for the construction industry, but it is nothing new. Over the previous decade, construction costs have risen 4.6% annually.

Our industry must stop firefighting and cooperate with clients to address this long-term tendency.

UK construction expenses are rising like others. In the coming year, Currie & Brown expects cost rises in all its regions. These vary by market, but common drivers are:

Global instability is caused by geopolitical crises like the Ukraine and Middle East. Continued disruption to Red Sea commercial routes and insurance and travel time hikes would undoubtedly raise prices.

Inflation is the biggest construction sector concern and cost driver. Several markets showed signs of lowering inflation in late 2023. The slight but surprising spike in UK inflation in December 2023 and the unwelcome recession warnings in early 2024 show that the situation is yet to change.

Global sustainability regulations are tightening. The UK construction industry faces several sustainable development building standards and a variety of regulations, such as new biodiversity net gain rules in England’s planning regime.

Compliance with new laws may increase short-term costs, but decarbonisation will reduce operational costs over time.

Skills and materials shortages raise costs nationwide. The UK Government’s Infrastructure and Projects Authority anticipates that 600,000 personnel will be needed to complete NCIP projects in 2024, with civil engineers in high demand.

Nick concludes: “2024 will bring new global construction industry challenges. UK economic growth will likely stagnate. Lack of trained personnel, pricey materials, sustainability compliance, and slow productivity will plague the building business.

“But industry-client collaboration to develop new methods of working and utilize technology will help limit cost rises. Importantly, the industry must do this to deliver major projects on time and on budget.”

Frustration Across Business as UK Recession and Building Slowdown Numbers Emerge

Original Source: Frustration across sector as new figures show UK recession and construction slowdown

Civil engineering and construction representatives say new statistics showing a technical recession and decreased UK construction output sends a message to the government that “cuts have consequences”.

Two consecutive quarters of negative growth characterize a recession. The ONS reported that GDP fell 0.1% between July and September 2023 and 0.3% between October and December 2023, putting the UK in a technical recession.

On the same day as new GDP figures showed the economy shrank in 2023, the ONS released data showing construction output down 1.3% from October to December 2023.

ONS claimed the decline ‘came primarily from a decrease in new work (5.0% fall), as repair and maintenance climbed by 4.0%’.

Delays to projects like the Lower Thames Crossing fuelled concerns about a construction industry recession, economists said. The cancellation of HS2’s northern leg exacerbated the recession and lowered government infrastructure expenditure confidence.

Civil Engineering Contractors Association (Ceca) director of operations Marie-Claude Hemming said: “Last year, Prime Minister Rishi Sunak pledged to grow the economy while putting the brakes on infrastructure spending, including the disastrous decision to cancel the second leg of HS2.

“Today’s numbers show cuts have effects. Construction enterprises went bankrupt in November 2023 at the greatest rate since the Global Financial Crisis.

“This represents people’s businesses and livelihoods, not spreadsheet statistics. Failure to support development and infrastructure will always slow growth.”

Hemming said “strong backing” for the construction industry will “secure recovery, by driving growth in the economy, creating jobs, and delivering the infrastructure that communities and businesses rely upon to thrive”.

Hemming said Ceca members, which include most UK civil engineering firms, wanted political parties “to adopt a sustainable and positive approach to the UK’s infrastructure that prioritizes long-term investment in projects and skills to deliver sustainable growth for all our benefits”.

She added, “2023 may have been an annus horribilis for the UK economy, but we believe that by working with industry government can seize the opportunity to turn a corner by refusing to repeat the mistakes of the past and investing in a prosperous future—for all parts of England, Scotland, and Wales

CPA’s head of construction research Rebecca Larkin said: “Construction activity is struggling due to broad falls in new orders since 2022 and a recession or flatlining economy.

“The CPA envisages it won’t be until the back end of the year that the economy and construction begin a meaningful pickup.”

NBS CEO Russell Haworth said: “Today’s GDP figures will come as little surprise to the construction industry, where a tough economy has been slowing on-site work for some time. Low private sector investment, a housing market slump, sluggish UK economic growth, and high interest rates have periodically slowed activity.

Haworth, CEO of building project data expert Glenigan, saw the news positively. , “Despite the doom and gloom, I’m hopeful.” “Glenigans latest Construction Forecast, based on our extensive database of active construction projects, suggests the end is near.

“Despite first-quarter contraction, our economists expect the construction industry to grow gradually (+8%) in the second half of 2024. A rising economy and market certainty will enhance consumer and company confidence, helping the industry.”

Contrary to Haworth, the Building Cost Information Service (BCIS) forecasted a drop in UK building output in 2024.

BCIS said its data ‘indicates a decline in construction output as recessionary pressures struck the industry’. The cost-of-living problem continues to impair the repair and maintenance sector, but excessive borrowing prices have hurt the new work sector, preventing investment. In 2024, BCIS expects new work output to shrink 5%.

BCIS chief economist David Crosthwaite said: “Persistent low growth has become characteristic of construction, as it has the wider economy, and it is highly likely that the industry is currently in a recession.”

Chancellor Jeremy Hunt said: “High inflation is the biggest barrier to growth, so halving it has been our top priority. High interest rates allow the Bank of England to lower inflation, but sluggish growth is expected.

The British economy is turning a corner, with experts predicting stronger growth in the coming years, salaries growing faster than prices, mortgage rates falling, and unemployment low. We must decrease taxes on employment and business to establish a better economy, even while many families are struggling.

Shadow Chancellor Rachel Reeves said: “The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of Conservative economic decline that has left Britain worse off.

“This is Rishi Sunak’s recession and the news will deeply worry British families and businesses.”

London Affordable Housing Construction Has Stalled, Gove Said

Original Source: Construction of affordable homes in London is grinding to a halt, Gove told

Housing groups have warned the government that London housebuilding is “grinding to a halt” after affordable home construction dropped by three-quarters in the past year.

In a letter to Michael Gove, the G15, which represents the capital’s 11 largest housing associations, said his measures did not raise supply enough and urged for billions of pounds for an affordable houses building programme.

The letter also indicated that G15 members, the largest affordable housing builders in London, will build 1,769 units this year, down 76% from 7,363 in 2022-23.

This week, Gove outlined ideas to increase urban home development.

One of the biggest improvements was a planning system revamp that made it simpler for developers to build on brownfield sites in cities and towns.

A government-commissioned evaluation of Sadiq Khan’s 25-year London plan was also released.

The study noted the scheme “frustrated” brownfield home deliveries and that the new proposals might add 4,000 homes each year. Khan called the review “nothing more than a stunt”.

The letter to Gove, signed by G15 chair Fiona Fletcher-Smith, CEO of L&Q Group, stated the initiatives were good but would not fulfill London’s needs.

It said: “Your recent interventions do not go far enough to address what, by your own admission, the broken system. Londoners are in crisis, yet the government has failed to invest in social housing.

G15 members own and manage over 770,000 houses and develop 15% of affordable homes nationwide.

Affordable housing includes all non-market rent and sale tenures. This includes social rent, where tenants pay half market rent, and shared ownership, where people acquire a piece of the home and pay rent on the rest.

These associations’ affordable house starts dropped dramatically in recent years, according to Guardian data. In 2021-22, 5,231 affordable house starts were built, the lowest in five years. More than quadruple this year’s amount.

As funds tighten, Fletcher-Smith warned London’s housing associations of a development “cliff-edge”.

Property associations must spend more on existing stock after the Grenfell Tower fire to fix aging property and handle damp and mold issues, in addition to increased building material prices.

Fletcher-Smith said L&Q, which rents 105,000 houses, had spent over £450m on fire safety repairs since 2017 and set aside £3bn over 10 years to bring aging stock up to the government’s decent homes benchmark.

Large housing associations, which borrow money in bond markets to build, pay higher interest rates. Servicing current loans costs L&Q £200m more.

Fletcher-Smith said: “Once you take all of those costs out, there is just nothing left for development. We would love to build more, we just don’t have the cash. The current government prioritizes house ownership, which is important, but we need substantial social housing.

The Centre for London think tank co signed the letter, which projected that one in four Londoners lived in poverty after housing costs.

One in 10 children and teens in some districts of the capital lived in temporary housing, according to the Guardian.

The G15 letter urged the government to invest £15bn a year over the next decade to build 90,000 social rent homes, including 30,000 in London.

Between 2021 and 2026, the government will spend £11.5bn on affordable housing, including £4bn in the capital.

A representative for the Department for Leveling Up, Housing, and Communities said: “We have an ambitious long-term housing plan to deliver the homes local communities want and need. Our £11.5bn affordable housing initiative is on track to produce 250,000 affordable houses.

“We recently announced a £3bn boost to the affordable homes guarantee scheme, which will deliver 20,000 new affordable homes nationwide.”

Summary of today’s construction news

Overall, the Building costs in the UK are predicted to rise 3.3% to 3.8% this year, following a 4.1% increase in 2023. As a result of the increases, construction companies will need to innovate new ways to manage costs and finish projects. Meanwhile, a recession is defined by negative growth for two quarters in a succession. According to the Office for National Statistics, the UK entered a technical recession in 2023 after a 0.1% decline in GDP from July to September and a 0.3% decline from October to December.

Concurrent with the release of revised GDP estimates showing a contraction in the economy in 2023, the ONS also revealed figures showing a 1.3% decline in construction output between October and December of that year. In addition, following a three-quarters decline in affordable home development over the last year, housing groups have cautioned the government that London housebuilding is “grinding to a halt”.

The G15, on behalf of the eleven biggest housing associations in the city, wrote to Michael Gove to complain that his policies were insufficient in increasing supply and to request billions of pounds to fund a scheme to construct affordable homes.

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