Loosening of foreign worker rules will help construction sector, but January output shows real challenges remain, warns RSM

In January 2023, the volume of monthly construction output decreased 1.7%, the weakest monthly growth since June 2022, and the lowest monthly value in level terms at £14,481 million since February 2022 (£14,719 million).

The decrease in construction output came from a decrease in new work, which fell by 4%, as well as anecdotal evidence relating to delays and cancellations brought about by economic uncertainty and adverse weather conditions. Output also saw a decrease of 0.7% in the three months to January 2023; following four periods of consecutive growth in the three-month series, again driven by a fall in new work (1.2%).

Commenting on the construction output data Kelly Boorman, partner and national head of Construction at RSM UK, said: ‘As expected, these figures demonstrate the real challenges being faced by the construction sector. As an energy and labour-intensive industry, economic pressures are still hitting construction businesses harder. The monthly fall in new works reflects uncertainty in the market, and with administrations continuing to rise at the start of 2023, the impact of inflation, reduced demand and tighter margins can be seen clearly on the pipeline of work. In addition, the high volume of previously secured works are now being pulled from pipelines, with contractors also stepping away from fixed price contracts.’

She added: ‘2023 is set to be a challenging year for construction, as businesses struggle to manage cash flows and protect their supply chains, while also dealing with serious labour shortages. As the government reveals its plans to address this issue and boost sector growth by loosening foreign worker rules, this brings some positive news for businesses gaining access to much-needed skilled labour.

‘But, long-term growth and market recovery require a pipeline of work, and, as GDP grew by 0.3% in January, showing some slight signs of economic improvement after stalling in Q4 2022, the industry will now be waiting to see if the government gives away any sweeteners in next week’s Spring Budget to help it get back on track.’