Despite the levelling off in interest rates the current rate has dampened momentum for the construction sector according to the Construction Products Association (CPA)
The historically high rate of 5.25% is affecting prospects, said the head of construction research at the CPA, Rebecca Larkin, speaking to Construction News.
“We are definitely in a worse position than when we started 2023,” she explained. “
We know that there’s no or very little new funding for remediation programmes.”
Ms Larken also said that urgent work to address RAAC remediation across the UK may put brakes on new build schools and hospitals.
The latest market forecast from CPA predicted a 6.8 per cent decline in construction output in 2023. Larkin said the forecast for 2024 was a further 0.3% contraction.
This outlook has been influenced by assumptions of a stagnant broader economy with flatlining GDP growth, unchanged interest rates and inflation staying higher than the Bank of England’s target of 2%.
“It’s very much the case that those conditions are constraining a recovery in housing and repair, maintenance and improvement, which are the two biggest construction sub-sectors, accounting for 38% of output,” Larkin said.
“When you add in the commercial sector as well, which is also susceptible to weak economic conditions, that is 50% of construction output.
“But the recovery will come. It will take some time and we forecast 1.8% growth in 2025 as construction starts to grow while the economy starts to stabilise and improve.”
Regulatory changes following the Grenfell tragedy will also influence construction firms and supply chains.
“On the practical side, I think [changes in law are] likely to slow down things in the earlier planning and design stages, but it’s important to remember that legislation and its resulting changes are overwhelmingly beneficial for the safety and quality within construction,” Larkin added.
“Any slowdown that legislation does produce is a very small cost compared to the benefit that will come out of it.”