The building consultant’s director of project monitoring, Matthew Law, explains why despite an improving  situation of recovery — set to continue through 2023 and 2024 — legislative changes will impact funding and therefore affect developer and contractor project financing decisions.

Recent improvements to building materials availability, as reported by the Construction Leadership Council, along with my predictions that there should be more stable levels of inflation overall in 2023, when compared to the previous year, shows this is an ever changing situation which should be welcome news for the construction industry.

With this in mind, the year ahead should be less unpredictable, but we know that at times of recent and planned legislative change, this increases lending and budget pressures.

As previously seen with the Part L 2014 amendments, which resulted in overall design and project cost increases at an average of 3-5% — according to our historic project data — we predict that the next wave of building regulations to come, or that are only being recently felt, will have an impact.

For instance, the recent 2022 Building Safety Act is inclusive of a new developer tax and levy, and the upcoming Future Homes and Buildings Standard will be putting pressure on the entire supply chain to meet the increased costs for enhanced building fabric and low carbon energy technology outputs.

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With insolvencies in the construction industry rising, this also gives way to further issues and funding vulnerabilities to be aware of.

In my experience, the legacy of existing projects with slimmer margins are often at greater risk, as they feel the impact of inflation more.

For projects starting now, there should be less risk in my opinion.

Budgets for new proposals, however, should be careful to take account of this recent inflation, to provide cost certainty for the duration of the project.

When margins are tight and schemes are under pressure, the risk of accidents can increase — it is also important to remain vigilant and liaise with the consultants, building control and the warranty provider for any reduction in build quality.

Labour scarcity is also still an issue and there are ongoing pressures for wages, although I predict this will improve as we expect outputs in some sectors to reduce based on contractor feedback.

To safeguard labour availability on projects, programmes need to be realistic, and include a modest ‘float’ with backup options needed in the supply chain.

Overall, funders, contractors and developers need to be looking at projects through the lens of data to make informed decisions and for the best project outcomes.

We are continuously monitoring current market conditions and analysing this against our insights, collated over the decades from multiple building sectors.