Inflation added £23bn to the cost of construction in 2022

Latest News Wed, Feb 15, 2023 6:47 AM

Rising costs add £23bn to the cost of construction output when compared to pre-pandemic price levels; inflation pressures are expected to continue through the first half of 2023.

The Office for National Statistics (ONS) has released data on the construction output of the United Kingdom covering all 12 months of 2022 last week.

The figures show that the total construction output value reached almost £205bn, marking the first-time annual construction value has surpassed £200bn and representing a 15% rise from 2021 output values in nominal terms.

Despite forecasts at the midpoint of 2022 being closer to £186bn, the new data reveals a remarkable rise in construction output value, driven by the inflationary effects of post-Covid-19 shortages, the war in Ukraine, and the cost-of-living crisis driving up energy and material prices.

Barbour ABI analysis of real versus nominal price indices showed the value would have been closer to £181bn if prices had remained at pre-pandemic levels. This means approximately £23bn has been added to the cost of UK construction since 2019.

Barbour ABI’s AMA Research Director, Laura Pardoe explained: “Price rises were at record levels over Summer 2022, with many goods seeing 25% annual inflation. This has now dropped closer to 15%, but some products still hover well above 20% and insulation products have recently jumped to 50%.”

Looking ahead, the UK economy is facing multiple headwinds, which could reduce the viability of many building projects.

Barbour ABI Chief Economist Tom Hall commented: “The Bank of England’s decision to increase the base rate to 4% is likely to weigh heavily on the residential sector over 2023 as mortgage holders tighten their belts. Added to this, the UK economy is widely predicted to stagnate as a best-case scenario over the short-term, which may well see other commercially sensitive sectors dependent on consumer spending also fall.

Construction product inflation and shortages are expected to ease over the second half of 2023 but will not return to the stability in the 2010’s. Contractors are working on razor-thin margins. All in all, 2023 is likely to be another bumpy year.”

Nevertheless, Barbour ABI also saw high levels of contract awards agreed throughout 2022, which reached a record high in Q1 2022. As a result, Barbour ABI is predicting high levels of activity in construction during 2023 in the infrastructure, warehousing, and health sectors.

Featured News

Specification news
Outline planning approved for new Data Centre in Hemel...

Outline planning has been approved for new 5,000 sqm Data Centre at 45 Maylands...

Read More >>

Specification news
ADSA at 40 - leading with action

The Automatic Door Suppliers Association (ADSA) is charting its course for the future...

Read More >>

BUILDING PRODUCT LIBRARY - LATEST BROCHURES

Vertical radiators complete range Brochure

Vertical radiators c...
By Myson

Download Now >>

Myson Radiant Heating Premium underfloor heating systems Brochure

Myson Radiant Heatin...
By Myson

Download Now >>

Which heat emitter is the right one? Brochure

Which heat emitter i...
By Myson

Download Now >>

Sustainable heating solutions for renovation Brochure

Sustainable heating...
By Myson

Download Now >>

Rearo Tradeline Brochure

Rearo Tradeline
By Rearo

Download Now >>

BUILDING PRODUCT DIRECTORY - LATEST PRODUCTS

DUOFLEX
DUOFLEX

DUOFLEX is a high quality elastomeric bitumen, hot bonded to the substrate incorporating the fleece...

Read More >>

TECSOUND
TECSOUND

TECSOUND is a polymer based, bitumen-free, high-density synthetic membrane. The combination of its...

Read More >>

ISOLAIR MULTI
ISOLAIR MULTI

ISOLAIR MULTI is a natural and ecological vapour-permeable, windproof and water-repellent thermal...

Read More >>

CONSTRUCTION VIDEOS - LATEST VIDEOS

Our SUSTAINABILITY Roadmap
Our SUSTAINABILITY Roadmap

Myson has a clear sustainability strategy in line with the UN Sustainable Development Goals (SDGs)...

Watch Now >>

Sustainable Energy Efficient Solutions
Sustainable Energy Efficient Solutions

From radiators and underfloor heating to ceiling convectors and towel warmers, Myson is the UK’s...

Watch Now >>

UNISENZA PLUS Smart Controls_The complete system solution
UNISENZA PLUS Smart Controls_The complete system solution

With Unisenza Plus Smart Controls you can easily monitor and control all linked heating products via...

Watch Now >>