Analysis Service Offers UK Construction Market Forecast with U.S. Snapshot Included
BY Alexander Jones
Interact Analysis Construction Barometer data visualization service suggests a tough year for the UK construction machinery market.
Interact Analysis sees a positive outlook for road building—perhaps more than construction equipment—because, globally, there is still significant investment in roads in emerging economies and the US Infrastructure bill is supporting the repair of roads in the United States. The market research firm estimates the total number of road building vehicles to be sold globally will grow by 3.6% in 2024 versus the previous year, slightly less than the growth rate experienced in 2023, which was 4.3%.
The UK construction industry is facing a gloomy outlook for 2024, despite tentative signs that the economy is improving. Inflation is still above the Bank of England’s target and so, for the time being, we don’t expect the Monetary Policy Committee to vote for lower rates. This is making mortgages expensive and pushing up costs for new construction projects, serving to deter people from buying houses and to discourage companies from borrowing to build. This building slump is having a negative impact on sales of construction vehicles. (Activity could potentially increase by the end of this year.)
Construction Output and Materials
In five of the past six months, construction output has decreased compared with the previous month. For the month of March 2024, UK Construction Output was valued at £15.16 billion—this was a 0.4% decrease compared with February 2024 and a 2.2% decrease compared with March of the previous year (adjusting for seasonality and price changes).
Monthly deliveries of bricks data can be a useful leading indicator for the number of new houses planned to be built. Looking at the 12-month rolling average, month-on-month deliveries have decreased every month from October 2022 to March 2024—that’s a year and a half of consecutive decline. It’s a similar story for other building materials like sand and gravel. Assuming further reductions to inflation, and subsequent moves to decrease interest rates, there is a chance that house-building activity may start to pick up again by the end of the year.
High material prices are another dampener on the construction industry, as they impact margins and the general health of businesses’ cash flows. It is one of the main reasons behind the increased insolvency rates affecting the construction industry. In March 2024, 310 construction businesses became insolvent, while in the 12-month period leading up to March 2024, this figure was 4,274—the highest of any of the major industries in the UK.
Other reasons for these startling figures include persistent labor shortages and companies taking on more business than they are equipped to handle, leading to eventual loss of contracts. To survive in this market, operators must make choices about where to deploy capital. They may decide to hold off purchasing/renting new machinery or may decide to switch from their preferred brands, purchasing cheaper equipment and shifting the dynamic of the market.
Impact on the Construction Machinery Market
Finning, a major supplier of construction equipment to rental companies and big contractors, announced a Q1 year-on-year net revenue increase of 3% in the UK and Ireland. This was driven primarily by used equipment sales (which nearly doubled), while new equipment sales remained level. Finning’s product support revenue was down by 7% over the quarter, due to a combination of lower customer activity levels and reduced machine utilization hours.
Ashtead Group, a large equipment rental company, had a rental-only revenue increase of 9% in the UK, of which 7% was organic. This was driven by both increased rental prices and higher sales volume, allowing the company to gain market share.
A generally tough 2024 for the construction industry will negatively impact the number of construction vehicles sold. According to the latest edition of Interact Analysis’s Off-Highway Vehicles Market Study, the construction machinery market (in unit terms) is expected to fall by 6.6% in 2024 versus 2023, with just over 30,100 vehicles forecast to be sold. This includes vehicle categories such as bulldozers, excavators and loaders.
Beyond 2024, we anticipate a small improvement in sales, with 30,600 units projected to be sold in 2025—a year-on-year increase of 1.6%. However, we’re not expecting sales of construction machinery to match 2023 levels until at least 2027.
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