Caution against high expectations for industry growth

Mace claim expectations for long-term industry growth need to be managed in its latest UK Market View.

Mace has published its Q2 UK Market Report, warning future growth is dependent on ‘more favourable conditions and the approach of the next government.’

The consultancy and construction firm has not changed its tender price inflation forecast: 

• 2024: 2.5 per cent nationally (2 per cent for London)
• 2025: 3 per cent nationally (2.5 per cent for London)
• 2026: 3 per cent nationally (3 per cent for London)

The report highlights the onset of more favourable conditions with material costs down 2.3 per cent annually and total construction new orders higher than at the end of 2023.

Labour cost pressures continue to ease and insolvencies in Q1 were at their lowest level since the end of 2021.

However, construction output suffered in Q1 with the industry shrinking 0.9 per cent and pipelines remaining weak while earnings growth is lower than the average for the whole economy and vacancies remain high, 40 per cent more than in 2019.

Mace cautions these indicators suggest that the policies of any new government will take time to have an effect.

Oliver North, director of cost and commercial management, UK & Europe, Mace Consult, said: “The next government needs to help create the right environment for infrastructure projects to help productivity and in turn attract investment to the UK. 

“However, long-term growth is something that the industry will need to be patient for as key metrics remain mixed.”

As the next general election draws near on 4 July, both major parties have put forward their plans for growth, making bold pledges to increase housebuilding as well as to deliver new infrastructure and get more people in work through apprenticeships. 

A recent Glenigan forecast predicts a Labour government could restore investor confidence in the sector with continued growth in private sector and civil engineering projects.

North added: “While the electoral outcomes domestically and overseas have the potential to impact costs and affect our industry, as a sector we are always working proactively to be ready to deliver.

“Best practices remain paramount; there needs to be close alignment between clients, consultants, contractors and subcontractors with supply chains engaged early and working collaboratively to ensure optimal outcomes”.

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