Economists predict UK Construction upturn in 2022

Refined Global

As we know all too well, the COVID-19 pandemic brought chaos to many sectors and industries. While the construction industry fared better than many, it was far from smooth sailing, with almost all sites closing during the early weeks and months of the crisis. 

However, during the second half of the year, the construction industry rebounded strongly as the sector found new ways to work while keeping its employees safe and healthy. 

Overall, it’s been a mixed bag for the construction industry, but just under a month to the new year, economists are predicting a significant upturn in 2022 and a much brighter future.

How did the pandemic affect the construction industry?  

Compared with other industries, the construction sector saw only small to moderate effects over the pandemic, especially when you take into account how the industry has recovered. 

Employment fell by roughly 3%, with a higher figure of 11% among the self-employed. But to confuse the matter, the number of employees actually rose slightly, as did the number of registered construction companies. 

Construction new orders did see a large decline as the pandemic progressed, especially in the early stages, with the entertainment and education sectors some of those that scrapped planned projects. 

But again, while there was a significant downturn, by the second quarter of 2021, much of the industry had rebounded to pre-pandemic levels, with private industrial activity and the need for extra warehouse space driving the recovery.

What happened last winter?  

While there was plenty of positive news during the first half of 2021, as the year came to a close, the picture wasn’t quite as rosy. A combination of COVID uncertainty, bad weather, ongoing material shortages, and supply chain issues caused the construction industry to sag once again. 

During the final three months of the year, large construction projects getting started had a combined worth of around £2.9 billion, the lowest three-month period since February 2020. This was 75% down from the summer and 22% down from the previous autumn.

So on the surface, it seemed like bad news, but all was not quite as it seemed. The value of the main contracts awarded during this same period was up 46% compared to the same period in 2020, which tells us that while actual construction may have been slow at the end of 2021, what was in the pipeline was anything but.  

What do economists predict for the construction industry in 2022? 

While we may be experiencing the final sting in the COVID-19 tail, there is plenty of optimism on the horizon, not least within the construction sector. The end of 2021 may have seen a steady decline in construction jobs started, but there are certainly shoots of recovery poking through.

Looking ahead in 2022, the picture is broadly positive, but also a mixed bag depending on the region. Northern Ireland saw a 20% increase in the value of its projects, while the North East, with 4%, and the East Midlands, with 3%, also saw notable increases. 

However, other parts of the country have seen significant declines, such as in Scotland (58%), Wales (51%), and the West Midlands in England (26%), but it’s difficult to determine whether these are long term trends or simply the effects of an industry still in flux because of COVID-19. 

When we talk about growth in 2022, it’s important to remember that the construction industry saw a drop at the end of 2021, so in a way, it’s inevitable that we will have major growth. But this is likely to be a surge that will continue into 2023, when most experts agree that the construction industry should return to pre-pandemic levels.   

While we remain in shaky times when things can change quickly, experts suggest that private house growth will be moderate during 2022, while greater public sector investment should see significant large-scale programs in education, health, and infrastructure. 

And finally, as we tentatively step into a ‘new normal’, many agree that office refurbishments and remodelling will play a large part in 2022, as companies across the UK attempt to reinvent themselves for post-pandemic work.   

Full steam ahead?

There are no doubt still plenty of twists and turns in this COVID-19 story, but it does seem at least that we are now entering the endgame of the pandemic. While numerous sectors may never fully recover from the events that began in 2020, the construction industry certainly isn’t one of them. 

Economists generally agree that 2022 will see a significant upturn within the construction sector. This may not always be steady, and no doubt there will be a few bumps along the road, but the forecast is good and, if anything, it should act as a springboard in 2023, when we should finally be able to put the spectre of COVID-19 behind us and see construction rebound.