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The bigger picture (2022) and what factors will impact construction during 2023

by

David Barnes

2022 was a year that will be remembered for the end of Covid-19 restrictions, the conflict in Ukraine, the passing of the Queen, and a chaotic Summer and Autumn period for the UK Government, culminating in three different Prime Ministers. Some of these have had wider implications (although not solely responsible) on the UK economy, causing a ‘cost-of-living crisis’ as well as concerns over our energy security.

At a UK parliamentary level, we have also seen the long-anticipated Building Safety Act 2022 receive Royal Assent (April 2022). The complex and detailed Act introduces significant changes to the way in which building safety is regulated, with significant consequences for developers, owners, landlords and tenants of residential buildings. Despite the legislation being “in force”, a great deal of secondary legislation will be required to give the Act teeth and much of this is set to be debated and implemented into 2023.

Several other major pieces of legislation affecting the built environment, including the Government’s flagship Levelling Up and Regeneration Bill and the Procurement Bill, also started their journeys in parliament although changes in leadership have delayed progress on these important areas. The Chartered Institute of Building (CIOB) has been monitoring progress on both Bill’s and we have called for the Government to work with the construction industry and wider built environment to help turn levelling up from political rhetoric into reality.

Once again, both on a UK and global level, environmental sustainability and reaching net zero featured high on the agenda although momentum appears to have stalled somewhat compared to 2021. This was potentially due to COP 27 flying under the radar in Egypt and being a much drier, administrative affair focusing on commitments made at COP 26 in Glasgow, around funding arrangements for loss and damage suffered due to climate change. Separately, concerns around the rising cost of energy bills have reignited the debate around the feasibility of eliminating greenhouse gasses or continuing to pursue a reliance on fossil fuels.

Appetite amongst industry for addressing climate change is still strong and it will require coordinated, long-term action. Isolated activities and private market initiatives alone will not be enough to address the scale of the challenge, and a variety of mechanisms will be needed to bring about the culture shift to drive a greener built environment. The Construction Leadership Council and supporting organisations continue to push Government for a National Retrofit Strategy and there is some optimism that policy makers are warming to domestic retrofitting on a large scale as an opportunity to improve the energy efficiency of the existing building stock whilst simultaneously reducing energy bills, making homes warmer and improving the quality of stock. This has been indicated by the Chancellor’s November Autumn Statement in which he announced a new energy efficiency taskforce would be created and “charged with delivering energy efficiency across the economy”.

How has the construction industry performed in 2022 and is this set to continue?

Despite all the doom and gloom at a national level, when specifically looking at construction’s performance over the last twelve months, the Office for National Statistics has indicated that construction output increased 0.4 per cent in August 2022, the second consecutive monthly growth. August 2022 is also the second highest monthly value in level terms (£15,011 million), with May 2022 remaining at the highest level since records began in January 2010 (£15,035 million).

The Construction Industry Training Board’s latest Construction Skills Network Industry Outlook predicts over a quarter of a million extra construction workers may be needed by 2026, around 53,200 workers per year, up from last year’s figure of 43,000. It also predicts all nine English regions, plus Scotland, Wales and Northern Ireland are set to experience growth resulting in increased demand for workers.

Despite the resurgence in 2022, the latest forecast from the Construction Products Association suggests construction output is set to fall by 3.9 per cent in 2023, following a rise of 2 per cent in 2022. Economic conditions are set to continue to push up costs and slow demand for construction projects. Despite predictions being increasingly difficult given the uncertainty that 2022 presented, it is likely that many challenges faced by contractors, such as rising material prices, energy prices, labour costs and staff shortages will continue in 2023.

What can we expect from the Government in 2023?

With the UK economy expected to be in recession until 2023, according to Ernst and Young, all eyes will be on the Government to continue to intervene on energy bills to soften the blow on households and businesses. But with support set to come to an end in April 2023, Government may look towards the retrofitting market to improve insulation, utilise the Stamp Duty System and implement further voucher schemes to spur on investment in the sector. In reality there is no silver bullet to solve the issue and a range of measures will be needed not only in the short term but that will address how we source and use energy for decades to come.

The construction industry will continue to follow developments on building safety with interest as the secondary legislation of the Building Safety Act continues through Parliament. In October 2022 the first enforcement action was taken by the Government against a block owner who failed to carry out necessary cladding works. This is set to be the first in a long list of remediation cases as Government continues to implement secondary legislation as part of the Building Safety Act (further information about preparing for the building safety framework can be found here).

Several Bills, such as the Levelling Up and Regeneration Bill, are also set to complete their parliamentary passage before new Bills are announced during the State Opening of Parliament – which is typically scheduled in the Spring.

While construction’s links to some parliamentary bills is not always immediately obvious, the sheer size and scale of the sector, the number of people it employs and the range of clients requiring its services, mean its relevance cannot be underestimated. It is our hope that the industry’s voice and expertise on matters ranging from education and employment to safety and sustainability will be heard by Government and help shape some of the vital decisions it will have to make in 2023.

About the author

David Barnes

David Barnes

David Barnes is the policy and public affairs manager – UK at the Chartered Institute of Building (CIOB). David works across all areas of UK Government policy, particularly on the areas of skills, building safety and sustainability. Prior to joining CIOB, David worked for a number of Government departments and a think tank.

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