Output rises yet signs of fragility remain
Mace Consult has published its latest UK Market View report, which shows that after only seeing modest growth recently, construction output has seen its strongest increase since 2022.
Overall, the first half of the year has witnessed a clear improvement on the second half of 2024, and output, whilst in a fragile state, is expected to strengthen further in 2026.
Looking specifically at Q3, within all new work, infrastructure was the fastest growing sector. Following on from a 2.2% increase in Q1, it expanded 3.2% in Q2 and is now 5.5% larger than in Q2 2024.
Furthermore, public non-housing has now risen 15.2% over the past year and recent new orders and government policy announcements indicate good prospects for further growth.
These incorporate over £725bn in funding earmarked for major programmes, and changes to speed up delivery being taken through parliament in the form of the Planning and Infrastructure Bill.
However, with the Autumn Budget approaching there remains some uncertainty, and an immediate recovery from the drop in housing starts around Gateway 2 cannot be expected despite the Building Safety Regulator and the Construction Leadership Council working closely to smooth the obstacles.
It is in this light that Mace Consult has maintained its tender price forecasts of 3.5% for real estate and 4.0% for infrastructure in 2025.
Oliver North, Director of Cost and Commercial Management, UK and Europe at Mace Consult, commented:
“That output is rising is clearly welcome, but beneath the surface there are signs of fragility, particularly in the form of skills to meet rising demand and in some areas of the market like in London where housing starts have been falling faster than elsewhere. The good news though is that policy steps are being taken to remedy barriers to delivery.
“Looking ahead to the coming quarter, there will be pressure on the Chancellor to raise tax receipts and help get inflation under control, which is a risk to interest rates being cut further.
“Overall, however, for the construction industry, the Autumn Budget is an important opportunity to instil confidence that growth can and will continue.”