Construction Industry Update – October 2024

Construction to grow 2.5% next year

Construction forecasters are expecting the industry to rebound next year after a tough 18 months.

Economists at Construction Products Association said cautious optimism is returning to the industry, led by an improving outlook for private housing and hopes for infrastructure spending growth next year.

Overall, total construction output is forecast to rise by 2.5% in 2025 and 3.8% in 2026 after falling by 2.9% this year.

Debt rule change to salvage infrastructure spending plans

Chancellor Rachel Reeves has confirmed the Government will make a technical change to the way debt is measured to release billions to boost infrastructure investment.

The wider debt measure is expected to allow for up to £50bn more borrowing to invest in big projects in roads, railways or hospitals.

Under previous government spending commitments investment was due to fall from 2.6% of the share of the economy in 2023 to 1.7% by 2028-29, or £20n a year in cash terms.

Housing forecast to drive 2025 construction growth

Cautious optimism is predicted to gradually return to the industry next year after a challenging last 18 months for two largest construction sectors – private housing new build and repair, maintenance and improvement.

According to the Construction Project Association’s Autumn forecasts, published this week, total construction output is forecasted to rise by 2.5%  in 2025 and 3.8% in 2026 after falling by 2.9% this year.

In private housing – the largest construction sector – falls in interest rates and mortgage rates appear to lead to gradual recovery in demand for the wider housing market. This is expected to lead to better prospects for housebuilders.

Chancellor finds over £1bn for new schools and social homes

Chancellor Rachel Reeves will announce in Wednesday’s Budget an extra £550m next year to get the school building programme on track and an extra £500m to boost affordable housing.

The extra spending on schools will lift next year’s school building programme spend up to £1.4bn.

Her cash injection aims to get the 10-year rebuilding programme, unveiled by Boris Johnson in 2021, back on track towards delivering an originally promised 50 new schools a year.