A recent survey reveals the construction sector is experiencing unprecedented confidence levels.
- In Q3 2024, the Construction sector’s business confidence reached 25.3, surpassing the national average.
- This confidence surge is attributed to increased domestic sales and favourable government policies.
- Despite confidence, high input costs and low capital investment growth present challenges.
- SME construction firms show significant output growth, contributing to industry optimism.
The latest survey by the Institute of Chartered Accountants in England and Wales (ICAEW) has highlighted a notable increase in business confidence within the construction sector. In the third quarter of 2024, confidence levels soared to 25.3, significantly higher than the national average of 14.4. This represents the most optimistic outlook since the fourth quarter of 2021.
This rise in confidence is largely driven by a combination of factors. A notable increase in domestic sales, coupled with optimism regarding lower interest rates and supportive government policies, has contributed to this upbeat sentiment within the construction industry.
While confidence is high, the sector still faces considerable challenges, particularly with regard to input costs. Input price inflation continues to be a burden, rising for the second consecutive quarter to reach 4.6 per cent. However, firms maintain a cautiously optimistic outlook, expecting inflation rates to decrease to 1.8 per cent in the coming year, lower than the UK economy’s 2.4 per cent forecast.
Moreover, the construction sector lags behind other sectors in terms of capital investment. Over the past year leading to the third quarter of 2024, the construction sector reported a modest capital investment growth of 1.1 per cent, the weakest amongst all UK sectors. A fifth of the firms surveyed expressed growing concerns about accessing capital. Despite these concerns, there is a slight expectation of increased capital investment which is planned to rise by 1.8 per cent next year, slightly above the historical average.
On a positive note, a separate survey indicates a notable rise in new work within SME construction firms. The NatWest survey reports the sharpest increase in new projects in two and a half years, alongside the highest output growth rate for smaller construction companies since January, further contributing to the overall optimistic outlook in the sector.
Despite challenges, the construction sector’s confidence is bolstered by strong domestic sales and supportive policies, signalling a positive outlook.
