The construction sector is bracing for a tougher year as growth forecasts are revised downwards.
- The Construction Products Association (CPA) has lowered growth expectations for 2024, forecasting a 2.9% decline.
- Private housing and repair sectors heavily influence the negative outlook due to delayed recovery.
- Uncertainty surrounding the Building Safety Act could hinder large project completions.
- Anticipated government spending might provide a future boost, but challenges remain.
In a recent release, the Construction Products Association (CPA) issued a revised forecast predicting a decline in construction output by 2.9% this year, a significant drop from the 2.2% contraction anticipated earlier. This adjustment reflects the ongoing struggles within the sector, where the recovery in private housing new build and repair, maintenance, and improvement (RMI) sectors has been sluggish. The CPA indicates that these areas, which collectively form the backbone of construction output, are key drivers behind the current downturn.
The CPA highlights that the setbacks in these crucial sectors are largely attributed to the prevailing high-interest rates, which have stayed elevated longer than previously expected. Such financial strains have postponed the recovery traditionally seen in housing market demand and related areas, usually following a house purchase. The Bank of England’s decisions regarding interest rates remain pivotal, as future cuts are necessary to revitalise market confidence and stimulate growth.
Moreover, the industry faces additional challenges from the uncertainty arising from the Building Safety Act. Concerns about responsibilities across the construction supply chain could delay the commencement or completion of significant high-rise projects. This legislative uncertainty adds a layer of complexity to an already strained industry, affecting long-term planning and investment.
Looking forward, the CPA maintains its forecasts for 2025 and 2026, anticipating growth rates of 2.0% and 3.6%, respectively. However, these numbers are predicated on the assumption of improved macroeconomic conditions. Consumer and business confidence will benefit from lower interest rates and sustained real wage growth, ideally positioning the sector for a rebound.
In the political arena, the newly formed government appears intent on enhancing planning policies to bolster housing and infrastructure delivery. While these intentions suggest potential future benefits, the lack of detailed information at this stage makes it challenging to foresee any immediate positive impact. At the same time, ongoing concerns about skills shortages and workforce retention present significant risks to realising these growth projections.
The construction industry’s path to recovery remains complex, hindered by economic, regulatory, and workforce challenges.
