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The CPA (Construction Products Association) has forecasted construction output to fall by 2.2% this year, before a broader economic recovery to underpin growth of 2.1% in 2025 with further growth of 3.6% predicted for 2026.
Beneath the overall figure, it is likely to be a year of mixed fortunes for construction firms, with performance highly dependent on which sectors they are operating in.
CPA head of construction research, Rebecca Larkin, said: “Almost all sectors of construction had a bad start to the year with persistent rainfall delaying work on site, especially outdoor work. Whilst we may see a degree of catch-up activity as the weather improves, smaller sites are likely to see work simply pushed back due to capacity constraints.
“The Forecasts anticipate a return to growth of 2.1% in 2025 and further growth of 3.6% in 2026 although clearly, there is greater uncertainty around activity in 2026 given the potential for a new government resulting from a General Election this year. The impact this could have on public sector spending plans and the longer-term delivery of infrastructure and public sector projects present the longer-term opportunities – and risks – for construction.”
The association stated that mortgage approvals and property transactions, within the private housing sector, has begun to rise with the prospect of interest rate and mortgage rate cuts heading into Summer has underpinned increased optimism in recent months.
It did predict that this is unlikely to translate into a pickup in house building overall this year given that output in the first quarter was significantly lower than a year earlier. Output is forecast to fall 5.0% in 2024, with stronger UK economic growth, combined with real wage increases and lower mortgage rates driving a return to growth of 5.0% in 2025.
Contractors working in private housing rm&i, the second-largest construction sector, also continue to face a subdued environment.
Output is expected to fall by 4.0% in 2024, as continued strength in energy-efficiency retrofit and solar photovoltaic work – bolstered slightly by government programmes – only partially offset a drop in large home improvements spending and a double-digit drop in planning approvals in 2023 that signals a smaller near-term pipeline of projects.
For firms operating in the commercial sector, refurbishment and fit-out continue to enjoy strong levels of activity, but overall commercial sector growth is only expected to turn positive until 2025.
In infrastructure, major projects such as HS2 and Hinkley Point C are driving the current high levels of activity, with additional uplift from 2025 expected due to offshore wind, National Grid upgrades and airport expansions.
