State of the construction industry 2024

1 Introduction

Brace, innovate, and demand more

According to the Construction Products Association (CPA) in January, the construction industry ​‘experienced an acute recession last year’. This was ​‘driven by double-digit falls in the two largest construction sectors: private-housing new build and private-housing repair, maintenance, and improvement.’¹ 

The industry consensus appears to suggest more hard times are on the way. The main positive news centres around an easing of inflation in some material types and a small increase in detailed planning approvals. 

The country as a whole made a strong initial leap towards lowering carbon emissions, mainly by nearly completely eliminating coal as a source of energy and replacing the supply with renewables. In the construction industry, we have an opportunity to continue the country’s progress.

Other headlines:

• The sector’s struggles with recruitment continue. 
  Glenigan’s market analysis noted a decrease in contract awards and starts, in line with a long-term
  downward trend.

The Bank of England’s most recent update to the Agents’ Summary of Business Conditions in March read:

• Construction output volumes continue to fall.
• Most now anticipate sentiment to begin to improve in the latter part of the year, although, as in other sectors, this is contingent on reductions in Bank Rate.
• The number of new orders remains weak.
• Concerns about insolvency risks remain high and continue to delay current and new development schedules.
• House building has fallen markedly over the last year, although the pace of decline is slowing.
• Commercial development continues to stagnate, though not to the extent seen in the housing sector.
• The infrastructure sector has seen more deferrals and cancellations of large new projects.
• Those contacts with projects that already have consent may see a pickup late in the year.
• Contacts cite slow and increasingly complex planning applications and approvals as a likely drag on the pace
  of growth.²

2 Output and activity

After a long-term reduction in their income, local authorities have seen their planning departments’ capacity decline. The knock-on effect, according to the Construction Products Association, has been ​‘a hold up of approvals on projects and a delay in getting spades in the ground.’³ 

The spring budget announced measures designed to rectify the issue. In it, the government made a £3 million commitment to match industry-led funding for a skills-and-education programme in order to attract workers to roles as local planners in planning authorities. The government also announced a pilot scheme to use AI to ​‘speed up development of local plans’ and explore new software ​‘to streamline key processes for planning officers’.⁴

According to the most recent official data from ONS, construction output:

• Decreased in December, falling by 0.5% (SA). The three months to December saw a decrease in overall construction output of 1.3% (SA) and a 3.2% decrease on the previous year.
• In the three months to December, repair and maintenance output increased by 4.0% (SA) to stand 12.2% up on the previous year. Public housing RM&I increased by 8.3% (SA) with non-housing R&M increasing by 3%. Private housing RM&I increased 4.3% (SA) during the period.⁵
• Overall new work output decreased by 5.0% (SA) during the three months up to December and decreased 12.6% when compared with a year ago. Public non-residential (+0.3% SA) increased against the preceding three months, while infrastructure work (-7.5% SA) decreased. 
• Public new housing experienced a 1.5% increase (SA) with private new housing experiencing an 8% decrease against the preceding three months. Commercial (-2.3%) experienced a decrease against the preceding three months. Industrial experienced a 0.5% decrease against the three months to December.⁶

The CPA made their own suggestions for improving the situation:

• Focus on repair and maintenance. By focussing on
  ​‘near-term basic repairs and maintenance that have a quicker turnaround, the UK economy and productivity could enjoy an immediate and obvious return on investment…along with a sizable stimulus for the sector.
• Make available more investment for transport work such as bridge and road repairs’.
• Recognise that the poor condition of the public estate could have been avoided by funding regular maintenance properly.⁷
   

3 Cash flow/​funding

With inflation slowing, the next few years should see a real-term improvement in the growth of the economy. As per the Office of Budgetary Responsibility, increased consumer and government spending will be the main drivers of this upturn.

Fixed investment is forecast to drop by 5.4%. Business and public sector investment are set to decline, together with a 5.3% drop in private-dwelling investment.

Back in January, the CPA were quoted as saying the cost of construction materials is projected to rise by 5.9% in 2024, which is more than the expected inflation rate.

Analysis

April’s figures showed a slower-than-expected drop in inflation. Andrew Bailey, governor of the Bank of England, said that the disinflation fall was unbalanced. ​‘In April household energy bills were likely to be 25% lower than a year earlier, but service sector inflation is running at 6%.’⁸ 
 

UK investment

Source: OBR

Construction Material Price Indices, UK

Source: GOV​.UK – Construction building materials: commentary, March 2024 (Published 10 April 2024)

Different materials have been experiencing different shifts in price. Government statistics cover the 12 months up to March 2024:

Source: GOV​.UK – Construction building materials: commentary, March 2024 (Published 10 April 2024)

Cancellations and delays

The National Infrastructure and Construction Pipeline, published in 2021 announced a number of projects and programmes that have now been delayed and cancelled including HS2 between Birmingham and Manchester.

CPA analysed the situation: ​‘It’s important to note what’s going on with spending on these projects. Although the government will declare that the value of the pipeline has increased from £650 billion to £700 – 775 billion, it is in fact more PR. Although spending has gone up, most of this is due to increased cost of infrastructure construction since the last pipeline and government has still nevertheless cancelled and delayed an array of projects the last two years.

‘Can the construction supply chain (architects, consultants, contractors, merchants, and product manufacturers) justify large investment upfront (in skills, capacity, digitalisation, and modern methods) for a long-term rate of return based upon the Pipeline? If firms in the supply chain do make those large investments, how can they know for certain whether they would be lumbered with high-cost assets and skilled workers that are not utilised? Given the constant delays, pauses, and cancellations we’ve seen in recent years, those firms would be forgiven for having some reasonable doubts.

‘Conversely, if firms don’t make the large upfront investments due to the risk of delays and cancellations to major infrastructure projects, there will be a lack of capacity and skills. This would either make large infrastructure projects substantially more expensive or financially unviable without substantial government subsidy.’⁹

The following have been promised:

• £600 billion of planned public sector investment over the next five years.
• £7.2 million to unlock improvements to local transport connections between the Cambridge Biomedical Campus and the city.
• Delivery of works on the Bletchley to Bedford section of East-West Rail will be brought forward.
• Upgrading the timetable on the East Coast mainline.

Profile of planned pipeline investment by sector (£m) 2023/24 to 2032/33

Source: https://​www​.con​struc​tion​prod​ucts​.org​.uk/​n​e​w​s​-​m​e​d​i​a​-​e​v​e​n​t​s​/​b​l​o​g​/​2​0​2​4​/​n​a​t​i​o​n​a​l​-​i​n​f​r​a​s​t​r​u​c​t​u​r​e​-​p​i​p​e​l​i​n​e​-​o​r​-​p​i​p​e​-​d​ream/

4 Skills and recruitment shortages

Main drivers for the skills and recruitment shortages

Source: Search Consultancy

According to recruitment agency Search Consultancy, the main driver of shortages in the industry is a lack of recruits (36%) followed by an issue with retaining staff (25%).

Brexit has had an impact. P.I.E.R wrote, ​‘Figures collated by the ONS suggest that until the end of 2020, over 9% of the construction workforce in the UK were EU nationals. In London, this rose to 30%. Now, it’s harder than ever for EU nationals to work in the UK. In turn, this is likely to create longer term impacts for the industry, including delays on projects due to staff shortages, and higher costs thanks to a dwindling workforce.’¹⁰

Coupled with this, a shifting attitude among younger citizens is adding depth to the recruitment sea change. This generation are more drawn to tech-based jobs. Daisie Rees-Evans, Policy Development Manager at the Chartered Institute of Building (CIOB) commented: ​‘There is an ageing workforce, particularly in the South West, which will impact knowledge sharing and project timelines if there isn’t ​‘succession’ in place for new talent entering the industry.

‘Research by CIOB suggests only a third of consumers would recommend the industry to their child or a young person they know. There are issues with the perception that construction is low-paid, dirty, and for people with poor academic skills.’¹¹ 

However, a fifth of construction professionals believe a shortage of technology and digital skills is the reason for construction talent shortages.

Investing in change – ​‘secure technical skills for future green, digital jobs’

As reported in PBC Today, Adrian Attwood, executive director of DBR Limited, said, ​‘Investing in skills needs to become a priority for the UK construction sector, particularly in specialist professions. Niche roles from conservation stonemasons and master jointers to leadworkers, gliders, and cleaners are at significant risk as talent pools continue to shrink.

‘With the economy starting to stabilise and an upcoming election providing an opportunity to press the reset button on the education system, I hope that policymakers and the industry can come together to develop a deliverable strategy to overcome the acute human resource shortages we’re currently experiencing.’¹² 

The CPA and Make UK have called for the government to introduce apprenticeship incentives for areas of skill shortages, and to allow greater flexibility for how and when manufacturers can spend their apprenticeship levy funds. The aim is to ​‘boost the quality and quantity of apprenticeships, [and]… to invest in the green, digitised jobs of the future.’¹³ Elsewhere, the CPA suggested that ​‘committing to continue the finding of traineeships is another important requirement to attract more talent into the industry.’¹⁴ What’s clear is that more focus needs to be placed on developing a forward-thinking working skills policy.

The future of office and site work

The situation of a lack of talent leading to delays and further spiralling costs is leading to companies intensifying efforts to attract and retain skilled labour via competitive wages and training programmes to bridge the skills gap.

This January, in a report focussed on scaffolding, Trade Solutions UK wrote, ​‘Demand has severely outpaced supply for years now, and relief is still years away as newly trained workers attempt to backfill a deep deficit. This persists, even as improved wages, benefits packages, and terms of work continue to improve. Companies must get more creative with recruitment tactics. With skilled labour remaining hard to find, new tactics must be deployed to qualify and employ the correct labour. Site supervisors are being placed under immense pressure to increase work hours and get the job done. It must be remembered that safety comes before the project, not the latter.’¹⁵ 

5 Net Zero and sustainability

The CPA stated that the UK will not reach its 2050 Net Zero promises without refurbishment of the existing housing stock, and that industry patience with the government is wearing thin. ​‘Our members say that the constant changing of direction and the lack of a consistent policy framework around energy efficiency has been frustrating and counter-productive,’ the CPA wrote. ​‘Particularly around future-homes standards and minimum-efficiency standards. As businesses, many have made long term, multi-million-pound investment decisions on the basis of previous commitments only to suffer losses when those commitments change. This has served to undermine the Government’s credibility.’¹⁶ 

The CPA have a very specific vision. They suggested that infrastructure projects should be procured not just on cost but also by recognising the value of sustainability – environmentally, economically and socially. ​‘Government departments must be seen to embed ​‘whole life’ values into their procurement decisions,’ the CPA wrote. ​‘UK construction product manufacturers should…invest significant resources into reducing the environmental impact of their products and materials, providing third party accreditation and undertaking local hiring, training, and supply chain initiatives that have a meaningful impact on their communities. In addition, procuring for value should ensure that concepts around greater safety are embedded and help avoid poor performing substitutions. Such work and expense are not undertaken here by most overseas companies that simply import into the UK, and this should be taken into account during the procurement process.’¹⁷

Waste from construction

Source: The Joint Research Centre (JRC)

The Joint Research Centre (JRC) published a report on construction and demolition waste (CDW) that suggested CDW makes up 40% of total generated waste.

Although plenty of materials are repurposed more can still be done. Up to 83% of CDW can be treated this way, and only excavated souls and dredging spoils cause much in the way of difficulty. In the EU this would save 33 Mt CO2 annually – more than the emissions from Estonia, Latvia and Luxembourg combined. The report suggested that the ecological and economical benefits went hand-in-hand with predicted savings totalling €7.3 – 19.5 billion. The situation will be similar in the UK.

The immediate future

In PBC Today, Jennifer Thomson, CPO of MachineMax, said that ​‘the focus on energy consumption, especially within sectors like heavy machinery, is set to be prominent in the new year. To effectively implement solutions for emission reduction there must be a greater emphasis on adopting a robust benchmarking approach.’¹⁸

Jennifer Thomson continued, ​‘Closer monitoring of machine data is one easy-to-grasp solution that should take shape, allowing companies to correctly identify operational efficiencies throughout all stages of a project – knowing how and when machines are being used can make a big difference in fuel consumption.’¹⁹ 

Overall, the industry is aligning with the Net Zero 2050 target and the demand for all new buildings and 20% of existing structures be zero-carbon by 2030. It is clear that Net Zero is a scenario that needs embracing, even if only to take advantage of its opportunities and to make sure that work fulfils regulations. The PBC Today article stated, ​‘This commitment to sustainability is expected to drive demand for green buildings and construction activity. Furthermore, the industry may receive a much-needed boost from funds allocated through key pieces of legislation passed in 2021 and 2022. This financial support could spur growth and offset some of the challenges posed by the shortage of labour and rising material costs.’²⁰

The CPA said that the government should ​‘extend the 12 months of 100% business rate relief on green plant machinery and equipment, as well as the 100% business relief on building improvements introduced in April 2023.’ After all, ​‘manufacturers are making green investments…which should have a minimum of a three-year relief to reflect the business’ investment payback period.’²¹ 

More carbon-neutral progress is to be made as new requirements go mainstream and modular and regenerative materials take hold. Construction tech like AI-enhanced robotic welding, 3D printing, and inspection drones are also becoming more accessible.

‘As the industry continues to digitise its processes, the ability to understand the emissions that are being generated and how efficiency can be improved is critical but also more readily available than ever before.’²² 

6 Collaboration

Suicide prevention

Back in September last year Prince William visited a MACE London construction site to learn about and raise awareness of the high suicide rate in the construction industry. Male construction workers in the UK are almost four times more likely to die by suicide than the national average. 700 people a year take their lives in construction-related suicides.

Companies have a duty of care to do what they can to support the mental health, safety, and wellbeing of their employees. Construction, after all, is a male-dominated industry.

Suicides are caused by a myriad of complicated reasons, but common contributors are increasing pressures on workers in relation to workloads and time pressures. Workers bearing the pressure of entire companies on their shoulders with inappropriate support can end up stressed, depressed, and anxious.

Creating an environment where workers are aware of these issues, where they feel comfortable talking about their mental health, along with giving due respect to time and work pressures during the planning stage, can save the lives of a lot men. 
 

The Built Environment Collaborative Database

One collaborative highlight from later on in 2023, was the development of the Built Environment Collaborative Database (BECD) – a database developed in partnership with organisations operating across every part of the construction sector. The BECD is free-to-access and ​‘designed to become the main source of carbon estimating and benchmarking for the industry.’²³ 

Elsewhere

Glenigan had a lot to say about collaborative working in their 2024 – 25 industry forecast. They reiterated P.I.E.R.’s statements that the industry’s workforce has been shrunk by a couple of factors: the effect of Brexit eliminating the supply of skilled EU workers, and the result of UK workers taking early retirement or moving to other industries.²⁴ 

The lack of skilled labour availability threatens to increase construction costs and disrupt the timely delivery of projects, and will intensify the need for firms to invest in the recruitment, training, and retention of skilled labour. There will also be more emphasis on using on-site labour more sparingly and effectively in order to accommodate rising workloads.²⁵

In addition, the Building Safety Act (BSA) is also set to change how projects are delivered. Whilst the BSA’s requirements will be felt most in the delivery of high-rise-residential and other ​‘high-risk’ structures, it is intended to progressively change construction practices more broadly. The act increases the importance of detailed pre-construction design and project planning and increases the risk, cost, and potential delay of amending designs during construction. More detailed pre-construction design and less scope for on-site design changes should increase the opportunity for offsite components and systems.
 

7 Technology adoption

Make UK and the CPA, have shown optimism by saying, ​‘The Government’s announcement of £4.5 billion Advanced Manufacturing Plan (AMP)…will help deliver better coordination’ in the manufacturing of construction products.’²⁶ 

The CPA said that they ​‘would like to see the AMP used as a vehicle to plan for a longer-term vision that builds on the investment appetite of the sector and takes advantage of Net Zero to boost the economy.’²⁷ 

World​Con​struc​tion​to​day​.com state in an article about 2024 Technology trends for construction that additive manufacturing, construction drones, Building Information Modelling (BIM), Robotics and automation are several technology trends to watch out for.

Connected construction sites are another upcoming feature in the industry. Construction sites will use a network of devices, sensors, and software to connect data, equipment, and people – techno-linkage that enhances lines of communication and collaboration in real time, and boosts safety and elevates the efficiency and productivity of construction procedures.

In addition to sustainability efforts, the adoption of technological advancements is set to revolutionise the scaffolding industry too, where companies are increasingly exploring the use of drones, artificial intelligence, and advanced materials to enhance safety and streamline operations.
 

8 Health and safety

Tragedies in recent years have had a significant impact on the industry.

The Buildings Safety Act is now fully established in law. The aim was to offer:

• Far-reaching protections for qualifying leaseholders from the costs associated with remediating historical building safety defects.
• An ambitious toolkit of measures that will allow those responsible for building safety defects to be held to account, including three new regulatory bodies.
• An overhaul of existing regulations, creating lasting change and making clear how residential buildings should be constructed, maintained, and made safe.
• The home-building industry has the clear, proportionate framework it needs to deliver more, and better, high-quality homes.²⁸

The latest enforceable legislature includes:

• The BSR’s new building safety régime. This has now commenced, allowing the BSR to issue building assessment certificates. The process will begin with higher-risk buildings being called up first to submit their safety case reports, mandatory occurrence reporting information, and resident engagement strategy. Organisations will have 28 days from being called up to submit this information. Failure to do so could be a breach of Section 79 (3) of the Act.
• A deadline for registering as building control approvers and building inspectors.
• Building control bodies and professionals must follow mandatory codes and standards for building control.
• The Professional Conduct Rules for Registered Building Control Approvers (RBCAs) and Code of Conduct for Registered Building Inspectors (RBIs) come into force.
• The introduction of a ​‘gateway’ system, under which the BSR will assess whether risks, roles, and responsibilities are understood at different stages of construction. Gateway 1 came into force in August 2021, with gateways
  2 and 3 also commencing as of October 2023.²⁹

The BSR has released their strategic three year plan where they outlined their approach from now until 2026 and beyond.³⁰

• They aim to have assessed about 40% of occupied higher risk buildings (which represents 65% of residential dwellings).
• Any work on remediating dangerous cladding will need to be completed or underway, and they will take action on those that are not compliant.
• By October 2026, the BSR will have completed a cost-benefit analysis of making regular inspections of the condition of electrical installations in relevant buildings. They are doing this to improve safety. They will also consider what further provision or guidance may be needed regarding stairs and ramps in relevant buildings, emergency egress of disabled persons from relevant buildings, and automatic water fire suppression systems in relevant buildings.

The Building Safety Act 2022 – key takeaways

• The act applies to new or existing occupied buildings over 18 metres high or seven storeys or more which contain at least two residential units. The design, refurbishment, and construction requirements also apply to care homes and hospitals meeting the same height threshold.
• The act creates a universal change in responsibility and culture within the building industry.
• The act establishes a more effective regulatory and responsibility framework for the construction industry and introduces clearer standards and guidance.
• It puts residents at the heart of a new system of building safety.
• And it clarifies who has responsibility for fire and building safety throughout the life cycle of a higher-risk building.³¹

New research from specification platform NBS shows half of industry professionals remain unclear on the responsibilities of duty holders for the gateways defined for higher-risk buildings.

What’s more, only 20% of responders feel confident they are ​‘very clear’ on the differences in responsibilities, and whether their project is defined as a higher-risk building.

NBS says a greater effort is urgently required to ensure a universal understanding of the BSA’s role. It wants the lines of responsibility and duties to be clarified. Additionally it says the consistency and quality of documentation and record keeping on construction projects needs improving.

9 Diversity

Late last year, the Office for National Statistics released figures suggesting that female representation in the workforce has reached a new high of 15.8%, up from a pre-pandemic figure of 12.6%.³² 

As with anything, the detail tells a slightly more nuanced story. In this case, the number of men working in the industry has decreased, slightly skewing the statistics. Approximately 1.8 million men were employed in construction as of late 2023, down 200,000 heads from 2020.³³ 

In the same period, 340,000 women were working in construction, an increase of 41,000.

Construction News quoted Chithra Marsh, chair of Women in Property, on the topic. ​‘There could be a few factors at play here. We have an ageing population and, with it, a group of senior men who have retired from the industry, dropping the male stats down and in turn increasing the female split.’

Source: https://​roof​in​g​to​day​.co​.uk/​u​k​-​r​e​c​o​r​d​s​-​s​h​o​r​t​f​a​l​l​-​o​f​-​o​v​e​r​-​4​0​0​0​-​f​e​m​a​l​e​-​r​o​o​fers/

At the other end of the career spectrum, we have the women who are entering the industry after graduation. We had several construction trainees as our Women in Property National Student finalists this year, and it was a similar situation last year, which is good news for the future.

‘There is also the possibility that retention of women could be improving at mid-career as the industry seeks to improve flexibility and the career pipeline.’³⁴

Paul McFadyen, Chairman of metals4U commented, ​‘It’s fantastic to see that female representation in construction is at the highest level in recorded history, but this clearly hasn’t filtered down to many of the top trades yet.’

‘While the industry has taken significant steps forward and made considerable progress in gender equality, there is still some way to go to improve female representation across all roles.’³⁵

The number of female employees in every category is lower than expected. 

10 The future of construction

With issues like the cost of living crisis, it’s difficult to manage a construction business without also worrying about modern tech – either because companies are under pressure to modernise or because or because they don’t want to miss opportunities that could unlock even more success and growth.

In a recent interview about Building Information Modelling (BIMS), Stephen Jones, Senior Director of Dodge Analytics said, ​‘we’re about halfway through what will probably be about a thirty year total transformation of the industry into something that will be completely unrecognisable by the time it’s done.’

While construction robotics and VR site assessments and training might feel like distant ideas, products like field management software represent a stabilising, forward-thinking step into the future. 

Technology at its best can make managers and CEOs better at what they already do. And when recruitment is such an issue, the appeal of tech can potentially bring eyes already drifting towards other industries back to construction, one of the world’s oldest and most notable employers.