Executive summary
1.
Overall confidence has weakened in comparison to 2022, with the industry buffeted by rising energy prices, inflation and soaring interest rates. This is resulting in a significant adjustment to asset pricing, which is likely to cause near term challenges. However latent investor demand and a continued shortage of stock in the UK is likely to see a recovery towards the end of 2023 as a revised pricing paradigm emerges.
2.
Increasing profitability remains top of the list of priorities for the industry (59%) as operators continue to protect against economic and inflationary headwinds.
3.
85% of respondents are concerned about the domestic political and economic environment, mirroring the disruption in Westminster in the latter half of 2022.
4.
Fuel and energy costs (69%), access to finance (65%), the international political and economic environment (64%) and the general cost of doing business (62%) make up the remaining top five challenges. Access to finance, has risen up the list of challenges facing the industry in line with interest rate rises, from being the issue of least concern in 2022 when interest rates were still at historic lows, to the third most challenging issue in 2023 – ahead even of access to talent and the skills shortage (the third most cited challenge in 2022).
5.
Just 26% of respondents are predicting increased activity in core sectors in their regions in 2023, a marked drop from 2022 (41%). While only 19% were predicting activity decreases last year, that has grown to 34% this year – mirroring the decline in overall industry confidence at the end of 2022.
6.
Residential (across all tenure and asset types) is still expected to drive the most growth, but in contrast to 2022, there were no sectors in which the majority of survey respondents were predicting an overall increase in activity, signifying potential stagnation as the industry takes stock of the structural changes in the market, including price adjustments.
7.
Skills and training was cited most often by respondents as an area of planned investment (75%), however carbon reduction and climate change was cited most frequently as either critically important or more important than most other issues.
8.
73% of respondents are planning to integrate ESG performance criteria into developments, investments and projects over the next 12 months, broadly similar to last year. However a larger proportion of respondents (45% vs 38% in 2022) reported that they would always be using such criteria.
9.
None of our respondents are currently operating at net zero, however almost three quarters (73%) are firmly on the journey, having either committed to net zero itself or other climate related targets.
10.
The financial implications of climate change and the associated measures to mitigate and manage its effects continues to weigh on the industry, with almost two thirds of our respondents saying that it is having either an immediate or future financial impact on their business (60% and 61% respectively).
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