What Do The Next 12 Months Have In Store? 2022 Predictions Within Construction
2022 predictions within the construction sector
One thing that even the most insightful forecasters have struggled with in recent times, is to accurately predict how the near future is likely to unfold. Whether that be predicting the course of the pandemic, or its economic consequences, most have got it very, very wrong.
As we venture into 2022, we decided to take a little time investigating what other forecasters are saying and to conclude what we believe the next 12 months have in store for the economy and how it will impact on the construction sector.
As 2021 has ended and 2022 has begun, life in the UK has become significantly more expensive. Grocery prices have increased, Christmas dinners set families back 4% more that in 2020, snacks 8% more, Uber journeys 10%, second-hand cars 57% and certain building materials by over 300%.
Whilst we are not getting as much “bang for our buck” as we did in 2019, many argue that economically the UK is in an excellent position, with Rishi Sunak outlining the UK is on course for the best growth since 1973 (following the three day week) and the IMF claiming the UK economy is expected to grow by 6.8 percent in 2021 and 5 percent in 2022.
With the economy apparently on track to outpace every other country in the G7 this year, for the second year in a row, much of this success down to the rapid vaccination programmes and the easing of restrictions over the last few months, things seem to be going in the right direction.
How about Construction?
The UK construction market came back to life in 2021, with a surge of delayed construction projects commencing in the early parts of the year. This initial surge however slowed, due mainly to well documented global supply chain disruption.
Nevertheless, project starts remained substantially ahead of 2020, and further growth is expected over the next two years with forecasts at 3% above 2019 levels.
However, growth certainly isn’t going to be sector wide. Industries such as leisure and hospitality have been hit hard over the past 24 months, and are unlikely to note any growth until 2024.
On the other hand, the Government have broadcast their intention to invest in large infrastructure projects, including housing and green energy projects, sectors where significant growth is expected. Whilst according to property week, growth within construction is predicted to come equally from residential, private and housing association projects (approx. 5.5%) followed closely by medical and manufacturing 5%.
The various reasons for optimism in 2022 area tinged by the reality that global supply chain issues may be the biggest hindrance.
Such uncertainly is continuing to cause serious turbulence within the construction sector, with materials shortages and associated cost increases obliterating construction budgets and timeframe and bring inflationary pressures into the economic outlook. This uncertainly and instability is certain to hang around well into 2022.
Not only will construction struggle to source materials, finding labour to carry out the work will also play a big factor and 2022 will see Labour shortages continuing to impact the market. Should the sector grow as predicted, then the demand for labour will only increase, exaggerating the current problem and leading to inflationary pressure on labour rates.
The next decade has been predicted by many to be the decade of the employee and all those good things we wrote about before the pandemic, ’flexible working in construction’ and ‘work life balance’, are concepts that all employers will have to embrace if they are to retain their cutting edge.
House builder Redrow expects cost inflation to be around 5% for the current financial year and Turner & Townsend have increased their 2021 tender price inflation forecast from 1.5% to 5.5%, warning that build inflation could remain at that level for four years.
Whilst this may all seem daunting, as every business graduate should know, every threat also presents an opportunity. As we quoted last year: “Good timber does not grow with ease, the stronger the wind, the stronger the trees”
The construction sector has been saying it for years, but now more than ever, it needs to invest in the development of staff and whilst that may come with higher risk and higher financial outlay, if the investment is well made it has the potential to revolutionise the industry, get it ready for the future and give those companies a substantial advantage over their competitors.
The industry also needs to invest heavily in technology and failing to do so, will only hinder firms in the future. But those who do will become more efficient and see better returns.
Even with all this volatility in the sector, we are expecting continued growth over the next 12 months. However, like all other businesses, we will need to continue to adapt to manage the ongoing challenges, but in so doing this will strengthen our business and enable us to take advantage of the opportunity to future proof talent pools.
We believe that in a period of much higher inflation, protecting profit margins will be more important than ever. We believe the sector can do this by investing in technology, especially IT and people, ensuring that as a sector we collectively work together to motivate, develop and attract more talent into the sector, which will be critical to ensuring we all benefit and are not hindered by what 2022 has in store.