Construction Industry: Market Update

The Construction Industry is at a critical juncture, facing significant challenges but with opportunities for growth depending on forthcoming government decisions. After a slow summer, impacted by the General Election and a pause in investment, the sector is now focused on the upcoming Budget for direction. While the new Labour government has expressed optimism, the Construction Industry is waiting for detailed plans and policies to drive much-needed investment.

In 2024, overall output in the Construction Industry flatlined, with a decline in new work and repair and maintenance activity. Recovery is expected in 2025, with a more substantial rebound predicted for 2026. By 2029, the Construction Industry is forecast to grow by approximately 24%. However, rising costs in materials and labor—expected to increase by 20% over the next five years—will pressure the sector, especially over the next two years before stabilizing in 2026.

The outlook for the Construction Industry varies by sector:

• Green – Positive Outlook:
  New housing is set for a slow recovery, aided by potential base rate cuts, though homebuyers must adapt to interest rates between 4% and 5%. The infrastructure sector shows some growth potential, but its future will depend heavily on Budget allocations.
• Amber – Moderate Outlook:
  Growth in public (non-housing) construction will be limited due to fiscal policies. Commercial and industrial property construction remains sluggish, with office space demand down significantly. Infrastructure and private non-housing repair and maintenance are also constrained by reduced public investment and private sector hesitation.
• Red – Negative Outlook:
  Private housing repair and maintenance is stalling under the weight of cost-of-living challenges, while public non-housing R&M is declining due to tightening government budgets.

The collapse of ISG Group Construction, resulting in the loss of over 2,200 jobs and disrupting £4.2bn worth of projects, has placed additional strain on the Construction Industry. This event exacerbates downward trends in equipment valuations, reflecting the broader difficulties facing the sector.

Despite these challenges, the worst may be over for the Construction Industry, but the next Budget will be critical in determining its future. Increased investment in key infrastructure projects, such as rail, hospitals, and prisons, will be essential for the sector’s long-term recovery. However, more clarity on the new government’s plans is needed for the Construction Industry to regain momentum.

Stay tuned for updates as we follow these developments closely via our Industry Insights Newsletter >> https://lnkd.in/ecEHW9ra