The recent general election has had a “seismic” impact on the construction industry, promising growth despite current challenges.
- Significant improvements are anticipated in private housing, retail, and office refurbishment sectors, according to a forecast by Glenigan.
- Although immediate challenges exist, a forecasted recovery with rising project starts is expected towards the end of 2024.
- Economic indicators suggest a boost as borrowing costs ease, driving a 0.8% projected growth in the UK’s economy.
- Major reforms are anticipated as the government plans to streamline planning systems, enhancing opportunities for development.
The outcome of the recent general election has sent ripples across the construction sector, with predictions pointing towards substantial growth in key areas, despite current economic hurdles. According to Glenigan, a prominent data specialist, the UK construction industry is poised for a significant turnaround, particularly within the private housing, retail, and office refurbishment sectors. This forecast, covering the period from 2024 to 2026, highlights the transformative impact of the election outcome which is considered “seismic” by industry experts.
Glenigan’s analysis notes that whilst economic growth may be subdued in the near term, with high interest rates persisting, the latter part of 2024 holds promise for a revitalised industry. The data predicts a modest increase in project commencements by 3 percent, signalling a cautious yet hopeful recovery trajectory. By 2025, a further expansion with project starts rising by 7 percent is anticipated, followed by an additional 6 percent in 2026. Glenigan attributes these positive projections, in part, to an expected decrease in borrowing costs and a slight uplift in economic growth by around 0.8 percent within the current year.
Allan Wilen, Glenigan’s economics director, underscores the unexpected scale of the general election results and how it could potentially expedite recovery within the sector. The Labour government’s active role in dismantling barriers, such as easing planning restrictions and launching major capital projects, could accelerate this momentum. “No one could have predicted a landslide of such large proportions,” he remarks, emphasising the potential for accelerated recovery as these obstacles are systematically addressed.
Despite initial sluggishness in project start rates due to the high interest environment and an uncertain economic scene, Glenigan suggests that the post-election climate has already begun to stabilise. The deferment of decisions on major infrastructure, such as the Lower Thames Crossing, underscores the government’s need to reassess vast developments. The anticipated decision on this project by early October exemplifies the broader strategic review processes currently underway.
The anticipated economic strengthening in the latter part of the year is expected to reinvigorate consumer spending and uplift investor sentiment. With the new government actively reducing political uncertainty, market confidence is expected to rally significantly. Sectors including retail, hotel, and leisure are set to benefit as price inflation eases and household budgets see relief. Glenigan also identifies promising developments within the office refurbishment and fit-out sectors, alongside renewed investments in logistics driven by the rise of online retail.
Recent declarations by Labour Chancellor Rachel Reeves signal profound changes in the planning landscape, addressing longstanding inefficiencies. Her commitment to reforming what she describes as an “antiquated planning system”, which ensnares significant projects in prolonged bureaucratic procedures, is anticipated to spearhead this evolution. Moreover, her decision to lift the ban on onshore wind represents a decisive step towards fostering a more conducive environment for sustainable development.
The general election is poised to act as a catalyst for robust growth within the UK construction industry.
