Construction supply chain faces challenges but optimism grows for 2025 recovery

The Construction Leadership Council’s (CLC) Material Supply Chain Group has issued its final statement for 2024, revealing that while product availability remains good overall, the construction sector continues to face a number of challenges. These include ongoing supply chain issues, fluctuations in demand, and concerns over the health of key markets such as housebuilding and home improvements. 

However, there is cautious optimism for recovery in 2025, driven by government reforms and a potential easing of economic pressures.

John Newcomb, CEO of the Builders Merchants Federation (BMF), and Peter Caplehorn, CEO of the Construction Products Association (CPA), who co-chair the CLC’s Material Supply Chain Group, reported that product availability levels are generally stable. While previously reported shortages of aerated blocks are still being managed, the situation is expected to improve, with supplies anticipated to return to normal by the end of the first quarter of 2025. However, the recovery is being tempered by reduced demand throughout much of 2024. Although there has been some recent growth in construction activity, much of this has been driven by public sector expenditure, particularly in civil engineering and non-housing projects. In contrast, the housebuilding sector and industrial construction have seen a decline in output.

Looking ahead, the Group pointed to reforms published in the National Planning Policy Framework as a potential source of optimism for 2025. These reforms are intended to facilitate the release of green belt land for development, which could stimulate construction activity. However, the changes have been criticized for primarily benefiting larger, volume housebuilders, with little provision for smaller builders who may struggle to capitalize on the new measures. The CLC remains cautious about a significant recovery in housebuilding until there is a drop in mortgage interest rates and a return of consumer confidence. While some growth is expected in the second half of 2025, the overall outlook for the sector remains subdued in the short term.

A key challenge identified by the Group is the need to ensure sufficient resources are in place to support a potential increase in development activity. Capacity has been reduced in response to lower demand over the past 18 months, and while efforts are being made to ramp up production—such as reports of increased brick manufacturing capacity—there is uncertainty about how quickly this can be achieved. Manufacturers may also be reluctant to invest heavily without clear evidence of sustained growth in the economy.

The home improvement market also remains under pressure. Sales of gas boilers, a critical component of the market, have fallen significantly, dropping from 1.7 million in 2023 to just 1.4 million in 2024. This decline is largely attributed to the slowdown in house sales and the resulting reduction in renovation work. Although sales of heat pumps have risen, they have not been enough to offset the drop in boiler sales. Nonetheless, heat pump manufacturers remain confident in their ability to meet the Government’s Future Homes Standard target of 600,000 installations by 2028.

The cost of construction materials is another concern for the industry. The CLC has warned of price increases of between 3% and 8% in January 2025, driven by higher energy costs. Further price hikes could follow, particularly due to rising employment costs. These increases could place additional strain on businesses already grappling with financial pressures. One area of particular concern is the credit insurance market, with small and medium-sized enterprises (SMEs) facing increasing difficulty obtaining the support they need to maintain confidence in the supply chain. Continued backing from insurers is crucial to ensure that both suppliers and buyers can engage in secure transactions.

The electro-technical sector is also sounding the alarm over potential material shortages in the coming year. The rapid expansion of data centres, combined with the growing demand for electric vehicle charging infrastructure, is expected to place additional strain on the supply of key materials, such as copper, which is used extensively in cables. The fluctuation in precious metal prices is already affecting manufacturers, and this issue could worsen in 2025 as demand increases.

Amid these challenges, the CLC has urged the construction industry to continue working closely with their supply chains to forecast and communicate material requirements well in advance. Ongoing collaboration and open communication between suppliers, distributors, and builders’ merchants will be vital in maintaining a healthy and productive construction industry. As the sector navigates these uncertainties, the Group remains hopeful that, with continued cooperation and a supportive policy environment, 2025 could mark the beginning of a more stable and sustained recovery for the UK construction industry.