Construction firms are likely to experience mixed fortunes during 2024 and it will be highly dependent on which sectors they are operating in, according to the Spring CPA Construction Industry Forecasts. House builders and contractors working in housing new build and repair, maintenance and improvement (rm&i) continue to face a subdued environment. Conversely, firms operating in industrial, commercial refurbishment and fit-out or working on major infrastructure projects continue to enjoy strong levels of activity. Overall, after last year’s decline in activity (which is not reflected in the official ONS data), construction output is forecast to fall this year before recovery in 2025 and 2026 alongside stronger economic growth.
In terms of key risks to the forecasts, on the positive side, the possibility of earlier and faster interest rate cuts points towards slightly better economic prospects, which could benefit housing new build and rm&i. Conversely, on the negative side, an overly cautious Bank of England keeping interest rates high for longer may lead to an upward blip in mortgage rates, adversely affecting housing demand.
Total construction output is forecast to fall by 2.2% in 2024, a marginal downward revision from the 2.1% decline in the Winter forecast. However, output is forecast to rise by 2.1% in 2025, a marginal revision upward from 2.0% in the previous forecast. Further growth of 3.6% is anticipated in 2026, but clearly, there is greater uncertainty around activity in 2026 given the impacts of a potential new government on public sector spending plans, given that the government is the largest client in construction, accounting for around one-quarter of construction activity. Within the overall forecast figures this year, there are mixed fortunes across the different sectors. However, the key drivers of the decline in construction output in 2024 remain falls in both private housing new build and rm&i. There are positive and negative risks to the forecast for the UK economy and construction given the current number of political and economic uncertainties. As a result, alongside the forecast it is important to note the CPA’s Key Risks as well as the Upper Scenario and Lower Scenario, in addition to the forecast.
Construction Industry Forecasts
FIS members have exclusive access to the CPA Forecasts and other construction related market data. More information is available here.