New orders pipeline 13% below long-term trend for UK market

Despite many headwinds in the UK construction market, output has continued to grow in real terms during 2023, outlines Arcadis’ in its quarterly Market View report.

Expansion in 2023 has come solely from repair and maintenance work, with new build output contracting for three consecutive quarters (Photo: AdobeStock)

However, expansion in 2023 has come solely from repair and maintenance work, with new build output contracting for three consecutive quarters.

By contrast, the new orders pipeline remains weak with orders secured in Q3 2023 13% below the long-term trend. The latest Arcadis Market View report suggests that the low levels of replacement workload in 2023 point to continuing downward pressure on tender prices.

Higher-than-average levels of insolvency contribute to the gloomy outlook, the report states. Since the start of 2022, it has been reported that more than 350 construction firms per month have become insolvent – 30% higher than normal. 

The report, entitled Waiting for Growth, states that individual construction sub-sectors are seeing very different expansion and contraction trends. It highlights evidence showing that housebuilding and some commercial workloads are continuing to struggle, while in infrastructure, projects in the energy and utilities sub-sectors are continuing at pace and have a positive outlook.

The report also highlights that for future pipelines, the picture is one of growing stress, with all regions seeing a decline in orders over the past 12 months. 

Simon Rawlinson, Head of Strategic Research and Insight at Arcadis, said, “Even though the UK’s growth outlook continues to look weak, early signs of a turning point in the economic cycle are a positive for the construction sector. However, contractors need to work through a weak order book and prospects for an immediate improvement in outlook are slim.

“We retain our view on forecast price inflation across building and infrastructure in advance of seeing firm market-backed evidence of a recovery in future workload. However, we note an improvement in sentiment in the housebuilding sector that should result in some recovery in workload in 2024. Our central case for the period 2023 to 2025 remains low inflation, not deflation.”