The outlook for the construction industry in the UK and Ireland in 2024 is generally positive, with both regions expected to see significant growth and some new challenges.

United Kingdom

The UK construction industry is predicted to rebound in 2024 after a challenging 2023. Several factors contribute to this optimistic outlook: Growth projections, technological investments, diversity and inclusion and sustainability focus.

The industry is expected to grow by 8% in 2024 and another 7% in 2025. This growth is driven by an increase in larger project starts and a strengthening UK economy with reduced inflation. The decline in 2023 was primarily due to high inflation and supply chain disruptions. However, the anticipated economic recovery, characterised by reduced inflation and increased consumer spending, is expected to boost the construction sector significantly.

Technological advancements are one of the key drivers of growth in the UK construction industry. There is a strong trend towards digital transformation within the industry. Investments in construction management software and cloud technology are expected to increase, aiming to improve efficiency, productivity, and profit margins.

Diversity and inclusion efforts to address the labour and skills shortage include increased recruitment of women and accommodations for neurodivergent employees, which are seen as critical to closing the skills gap in the industry.

Sustainability initiatives such as decarbonisation remain a high priority. Over 80% of industry stakeholders view reducing carbon emissions as crucial, although there is a need for more guidance on implementing these measures effectively.

Ireland

Ireland is expected to experience the strongest construction growth among 19 European countries with construction output forecast to expand by 4.4% in 2024. This growth is supported by significant developments in the residential sector, with new housing completions estimated to rise by 7.9% in 2024. The increase in housing projects is a response to the high demand for residential properties, driven by population growth and urbanisation.

The improvements in the availability of materials, greater cost certainty and the availability of development financing are expected to support the growth in the Irish construction sector. ​The challenges faced in 2023, such as supply chain and material shortages, are anticipated to ease, providing a more stable environment. This stability is crucial for developers and financiers to plan and execute projects effectively.

The upcoming revision of the Energy Performance of Buildings Directive is set to drive significant growth in refurbishment and alteration projects. This directive aims to make all new buildings emission-free by 2030 and transform existing building stock into zero-emission buildings by 2050. Compliance with these stringent energy efficiency standards will require substantial investment renovating older buildings, thus creating new opportunities for the construction sector.

While the outlook for the construction industry in both the UK and Ireland is positive, several challenges remain. The ongoing labour and skills shortage, although being addressed through diversity initiatives and apprenticeships still poses a significant challenge. Moreover, the industry must navigate the complexities of new regulatory requirements and ensure that sustainability goals are met without compromising on project timelines and budgets.

In conclusion, the construction sectors in the UK and Ireland are set for a period of robust growth and transformation in 2024 and beyond. Economic recovery, technological advancements, and a strong emphasis on sustainability are key drivers of this positive outlook. However, addressing the labour shortage and effectively implementing new regulations will be critical to sustaining this growth and achieving long-term success.

Author: Colm McGrath, MD, Surety Bonds part of Howden

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