Construction to grow 2.5% next year

Aaron Morby 1 week ago
Share

Construction forecasters are expecting the industry to rebound next year after a tough 18 months.

Economists at the Construction Products Association said cautious optimism is returning to the industry, led by an improving outlook for private housing and hopes for infrastructure spending growth next year.

Overall, total construction output is forecast to rise by 2.5% in 2025 and 3.8% in 2026 after falling by 2.9% this year.

Autumn forecast highlights


• Construction output falls by 2.9% in 2024 and rises by 2.5% in 2025

• Private housing output falls by 9.0% in 2024 and rises by 8.0% in 2025

• Private housing repair, maintenance and improvement to fall by 4.0% in 2024 before rising by 3.0% in 2025

• Infrastructure output to fall by 0.4% in 2024 but rise by 1.6% in 2025

• Industrial output to fall by 4.7% in 2024 and by 3.7% in 2025

In private housing falls in interest rates and mortgage rates appear to be leading to a gradual recovery in demand for the wider housing market.

This is expected to lead to better prospects for house builders. Economists at the CPA said the new government had signalled clear intent to boost house building through easing planning by proposing major changes to the National Planning Policy Framework, which could ease one of the most-cited supply constraints, particularly for smaller house builders.

The Autumn Budget could have significant implications for critically needed investment in health, education and infrastructure.

Infrastructure, the third-largest construction sector, is forecast to rise by 1.6% in 2025 and 3.8% in 2026 after falling marginally, by 0.4%, this year.

Increases in investment in the water to deal with sewage dumping in rivers is expected to boost activity from 2026. Energy infrastructure activity, however, continues to go from strength to strength as wind farm activity ramps up again.

CPA Economics Director Noble Francis said: “Construction has suffered a very challenging period over the past two years, with sharp downturns in the two largest sectors, private housing new build and repair, maintenance and improvement.

“However, cautious optimism appears to be creeping back into the industry. Broader UK economic growth, helped by lower interest rates and sustained real wage growth, combined with a stable government, appears to be leading to improving consumer and business investment. However, the government’s Autumn Budget will be key to ensuring that this remains the case.

“There are significant upside risks to the forecasts if the new government can improve the delivery of house building and infrastructure.

“However, downside risks continue to prevail. The UK construction industry has lost over 10,000 firms in the last two years. ISG, the 6th largest construction firm, is the latest example, as high costs, project delays, and skills shortages on fixed-price contracts acutely affect the whole supply chain.

“In addition, concerns remain over whether the government will cut capital expenditure and pause, delay, review and cancel yet more investment in key infrastructure projects in the short-term to meet its fiscal rules. If so, falls in infrastructure activity could overshadow recovery in house building and rm&i.”

Latest news

Network Rail scales back Liverpool Street station scheme

Architect changed and developer Sellar dropped as £1.5bn original plan scrapped
51 mins ago

Muse JVs with pension fund insurer to build 3,000 homes

New Habiko business will build affordable low carbon, rental homes
2 hours ago

£1.3bn revamp plan for South London shopping centre

Landsec plans 1,700 homes at Lewisham shopping complex site
2 hours ago

Network Plus names new chief executive

Kevin Fowlie steps up to succeed founder Dan Holland
26 mins ago

TanRo lands latest Clowes business park

Groundworks due to start in new year at 31-acre Harrier Park site
1 hour ago

New consultant buys M&E specialist TACE

Contollo Group has ambitious growth plans over next five years
41 mins ago

Skanska signs £197m deal for Mayfair offices job

South Molton job consists of two big office buildings
1 day ago

Cost of fixing unsafe cladding soars to over £16bn

Watchdog urges new 'hard target date' to complete all recladding works
1 day ago

Scottish Water opens bidding on £800m framework

Innovative ceramic membrane water treatment works programme
1 day ago

Carbon capture concrete hits London sites

Neustark and Aggregate Industries launch new technology to UK market
1 day ago

Six win £300m cladding retrofit deal

Major social landlord Riverside Group to reclad 22 towers
1 day ago

Winchmore lands brickwork package on Graham £80m academy

Alkerden Academy is one of the largest schools to be built in the region
1 day ago

Construction firms blast “true cost of Budget”

Firms fear tax hikes will lead to reduced hours and job cuts for staff
4 days ago

Steel bridge specialist sold to staff

Nusteel Structures Group becomes industry's latest Employee Owned Trust
4 days ago

Ex-Lendlease chief to lead Euston housing regeneration

Bek Seeley to head Euston Housing Delivery Group
4 days ago

Ardmore lands Kensington hotel revamp

Contractor to transform former Kensington Holiday Inn
4 days ago

RED wins £35m brace of projects in Bristol

Works include student halls and major facade fire safety remediation
4 days ago

Wates starts £300m Gartree super prison job

Early works start on 1,700-prison place job next to existing prison
5 days ago

Five road schemes worth £1.3bn axed

Still no decision on £1.5bn A66 upgrade or £9bn Lower Thames Crossing
5 days ago

Budget: Chancellor to fund HS2 tunnels to Euston

Schools and hospitals get extra £1.85bn cash injection to tackle work backlog
6 days ago

Skills card changes will mean fewer labourers

CSCS wants to cut the numbers with 500,000 labourer cards currently in circulation
5 days ago

Wates hires former ISG fit-out chief to lead new team

Lee Phillips to head up new London office fit-out arm
6 days ago

Major London offices to student rooms scheme approved

65 Fleet Street office block to be converted to 850-student rooms
5 days ago

M Group Services buys MEICA contractor BGEN

Warrington-based engineering contractor employs 1500 staff
5 days ago

VINCI Construction swoops for FM Conway

Conway family sells £580m turnover Kent-based highways contractor
6 days ago

United Living bolts on property upkeep firm Pilon

Deal to buy £40m turnover social housing property services contractor
6 days ago

Sheffield facade specialist bought by Swedish firm

Building envelope giant Fasadgruppen makes first UK acquisition
6 days ago

Nexus buys Coleman Construction & Utilities for £5.4m

Nexus moves into civils with acquisition of East Sussex contractor
6 days ago

Councils get £68m to clear brownfield sites

Site renovation work will clear way for 5,200 new homes
6 days ago

Private investor buys Midlands contractor MCS

Deal values £100m revenue building contractor at £22m
6 days ago

Contractor services