Achieving targets lifts construction output growth to 3.7% p.a. over the next decade
Compound annual growth in UK construction output under housebuilding and net zero path (%)
Construction sector would grow by 3.7% per annum
If the government is successful in boosting housebuilding so that there are 3.0 million more homes in 2033 compared to 2023 and annual investment into net zero meets the CCC projections by 2028, then construction output could grow by 3.7% per annum on average between 2024 and 2033. That is a significant uplift from the average annual growth of 1.2% seen between 2008 and 2018. Over 2024 and most of 2025, housing targets are unlikely to have a significant impact on output, given the lag between the policy announcement and work commencing. In our projections, construction output contracts by 0.5% on the year in 2024, as the impact of the higher interest rate environment continues to play out. Our model indicates that output would rebound in 2025 as interest rates are cut and policies support housebuilding and net zero work. As a result, the construction sector would grow by 14.2% in 2025 and reach a high of 23.4% year-on-year in 2026 as housebuilding ramps up in order to reach the target by 2029.
3.7
4
3
2.0
2
1.2
1
0.6
0
1997-2007
2008-2018
2019-2023
2024-2033
UK construction output by type of work under housebuilding and net zero path (share of GDP, %)
New work housing
I&R housing
New work other
I&R other
10.7
Surge in activity driven by housing new work and housing I&R
10 12
9.4
8.6
8.0
Output in the construction sector was equal to around 8% of GDP in 2023. This would rise to a peak of around 11% by 2027. Much of this rise is due to greater new work in housing, which made up 23% of construction output in 2023, rising to 33% by 2027. Meanwhile, housing I&R increases from 21% of the total to 24%.
7.0
0 2 4 6 8
2003
2013
2023
2027
2033
Sources: Capital Economics and ONS
30
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