Home Commercial News Inflation ‘adds £23bn to annual construction output costs’

Inflation ‘adds £23bn to annual construction output costs’

Inflation added £23bn to the cost of construction last year

This is the first time annual construction value has surpassed £200 billion, representing a 15% increase in nominal terms over 2021 output values. According to a Barbour ABI analysis of real versus nominal price indices, the value would have been closer to £181 billion if prices had remained at pre-pandemic levels. According to the construction information specialist, price increases are expected to slow in the second half of this year. It does, however, warn that some product lines, such as insulation, which recently increased by 50%, could see double-digit price increases, reports Construction Journal.

“The Bank of England’s decision to raise the base rate to 4% is expected to have a significant impact on the residential sector in 2023, as mortgage holders tighten their belts,” said Barbour ABI chief economist Tom Hall. Furthermore, the UK economy is widely expected to stagnate in the short term as a best-case scenario, which may cause other commercially sensitive sectors reliant on consumer spending to suffer as well. Inflation and shortages in construction products are expected to ease in the second half of 2023 but will not return to the levels seen in the 2010s. Contractors are operating on razor-thin profit margins. Overall, 2023 is likely to be another turbulent 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.


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