Navigating the Tides: An Analysis of Construction Costs from 2020 to 2023


The construction industry has been on a roller coaster ride since 2020, with various events significantly influencing construction costs. From the COVID-19 pandemic to global political unrest, these events have left an indelible mark on the sector. This article delves into the changes in construction costs since 2020, the current costs in relation to pre-pandemic levels, the industry’s early performance in Q1 2023, and the outlook for the rest of the year.

The Impact of 2020 Events on Construction Costs

The year 2020 was marked by the onset of the COVID-19 pandemic, which had a profound impact on all sectors, including construction. Supply chain disruptions, labour shortages, and a sudden halt in operations led to an increase in construction costs. According to an analysis by Ed Zarenski, construction cost inflation had to be calculated and added to the previous budget to account for the unanticipated cost increase due to any delay in the project.

The Rise of Construction Costs Post-Pandemic

Post-pandemic, the construction industry witnessed a significant rise in output costs. The inflationary effects of post-COVID-19 shortages, the war in Ukraine, and the cost-of-living crisis drove up energy and material prices. According to data from Construction News, rising inflation added a whopping £23bn to the cost of the sector’s output compared with pre-pandemic price levels.

Early Performance of the Construction Industry in Q1 2023

The construction industry’s performance in Q1 2023 showed some interesting trends. According to the Office for National Statistics (ONS), monthly construction output increased by 0.2% in volume terms in March 2023. This increase came from a rise in new work (0.7%), partially offset by a decrease in repair and maintenance (0.6% fall). However, total construction new orders decreased 12.4% in Q1 2023 compared with Q4 2022.

The Outlook for 2023

Looking ahead, 2023 is expected to be a challenging year for the construction industry. According to BCIS, expectations include a recession with GDP falling 1.2%, interest rates rising to 4% by the end of the year, and a fall in new work construction output down 6.2%. Global events, such as the Ukraine war and changes in the Chinese economy, are also expected to impact the UK economy and the construction industry.

Despite the soaring output costs, construction wages have failed to match the rate of inflation. Inflation has been blamed for a number of issues across the construction sector, including the sharpest decline in new housebuilding since the start of the decade.


The construction industry has faced numerous challenges since 2020, with construction costs seeing significant changes due to various events. As we navigate through 2023, the industry will need to adapt to these changes and find efficient ways of working to ensure that inflation doesn’t impact project delivery. With the right strategies and resilience, the construction industry can weather these tides and continue to build a stronger future.