Mace’s latest UK Market View demonstrates that expectations should be managed when it comes to the construction industry’s long-term growth as it depends on more favourable conditions and the approach of the next government
Mace’s current tender price inflation forecast nationally has not changed since earlier this year, standing at 2.5% for 2024 and 3% for 2025 and 2026.
The figures for London remain at 2% for 2024, 2.5% for 2025, and 3% for 2026.
Market conditions are becoming slightly more favourable
Looking widely at the market, material costs are down 2.3% in annual terms, and total construction new orders are higher than at the end of 2023.
The report highlights that labour cost pressures continue to ease, and insolvencies in Q1 were at the lowest level since the end of 2021.
Another challenging quarter for construction output
This quarter, construction output shrunk by 0.9%, and pipelines remained weak.
The report also found that earnings growth is lower than the average for the whole economy, and vacancies remain high.
There are around 40% more vacancies than in 2019, worse than the wider economy.
In its latest outlook, the CITB also suggested that an extra 251,000 construction workers will need to enter the industry over the next five years.
Will new government policies affect the construction industry’s long-term growth?
Indicators suggest that new government policies will take time to have an effect.
It would, therefore, be surprising if anything fundamental changed over the coming months.
However, there is hope that as we move into 2025, progress will be made.
Creating the right environment for infrastructure projects is essential
Oliver North, director of cost and commercial management, UK & Europe, Mace Consult said:
“The next government needs to help create the right environment for infrastructure projects to help productivity and in turn attract investment to the UK. However, long-term growth is something that the industry will need to be patient for as key metrics remain mixed.
“While the electoral outcomes domestically and overseas have the potential to impact costs and affect our industry, as a sector we are always working proactively to be ready to deliver. Best practices remain paramount; there needs to be close alignment between clients, consultants, contractors and subcontractors with supply chains engaged early and working collaboratively to ensure optimal outcomes.
“From a cost perspective at least, conditions do seem to be becoming slightly more favourable, albeit not enough for us to adjust our tender price outlook.”
