It’s been Hard Times for construction. At times, it’s felt like there Ain’t No Sunshine. But we could be yet to see Glory Days – there may be hopeful chorus ahead.
In all seriousness – it’s been a tough year for construction. Tougher than expected.
The sector took a hard hit, driven by a perfect storm of the housing market downturn, increasing financial pressure, and lengthy project delays.
However, There Is A Light That Never Goes Out, and the industry does show signs of stabilising – if all goes according to expectations. The headwinds that have shaped this year are still blowing, but we’re very much Stayin’ Alive.
Housing Feels Like It’s Only Going Backwards, but it’s ready to shift it up a gear
Private housing was something of a sore spot in 2024. Buyers shied away – driven by inflationary pressures and climbing mortgage rates –, so developers scaled back.
Affordability remained a significant blocker. Perhaps the most significant. Despite expectations for base rates to be further lowered in 2025, we’re unlikely to see a return of the anomalous surge of 2021’s housing market. First-time buyers may continue to stay put, and we may all feel the ripple effect.
However, build-to-rent held its own across the year. The rental market in major cities remained strong and building schemes flourished. Looking ahead, incentives aimed at social housing and the recent easing of planning restrictions could bridge the gap—but we’ll wait to see what’s to come.
RM&I is Under Pressure
Repair, maintenance, and improvement activity fell. Major home improvement is largely on hold. Increased inflationary pressures left little room in household budgets for renovations, and in 2024, builders and suppliers felt the knock-on effects.
Some government initiatives provided a little respite to both homeowners and the contracting market. Policy-enforced energy efficient retrofits helped to fuel demand for building materials and installation.
Mortgage rates are set to decrease in 2025, with Rightmove labelling it ‘the buyer’s market’. For construction, this could be huge. We could be set to welcome in a wave of home-buying – and new home owners love nothing more than to renovate. One thing is for sure: 2025 will be a year to watch.
Steady As She Goes for Infrastructure
Infrastructure is vital in all industries and construction is no exception. In 2024, it’s been our safety net. A steadying hand for a ship on a rocky course, over the year, the output was relatively stable, seeing a decline of less than half a percent. Government-backed projects plodded steadily along, supported by long-term initiatives in the likes of travel and clean energy, despite tempering by delays and cancellations elsewhere. Projects like the controversial Stonehenge Tunnel, branches of the juggernaut transport project HS2 and the much-debated Lower Thames Crossing may have been the victim of a political shift, and not without consequence for the wider construction industry.
Public investment was made with great caution. Consensus is that, as far as infrastructure is concerned, essential maintenance takes precedent over new buildings. With one exception – green energy became the star of the show. Wind farms and solar installations were green-lighted, propelled by net-zero commitments.
We think it’s likely to ramp-up in 2025, as an effort to future-proof national infrastructure. Good.
A tale of two markets: Against All Odds for industrial and commercial
Fortunes have been mixed for the industrial sector. Overall output did fall – benched by a handful of stand-out projects. Gigafactories, logistics hubs, and large-scale manufacturing expansions (more on that later) have provided a new lease of life.
Commercial construction faced similar issues - focus projects like commercial towers came up against major delays from developers. The industry is still puzzling through how to combat high costs and the stickiness of regulatory red tape. Nonetheless, demand persists – the need for new office space and reuse conversions is high as ever, and we don’t think it will come back down. 2025 will be a waiting game – if financial pressures ease, commercial projects may finally break ground. And the industry needs them to.
Who Built This City?
The sector’s Achilles’ heel – keeping a continuous flow into the workforce. Project booms are no use if there’s no one to build them. An ageing workforce and a drop in new, skilled recruits is a real problem.
It’s estimated that 350,000 workers have been lost in the last five years alone. Critical roles are left unfilled on a mass scale.
The question of why we’re not getting fresh faces is a complicated one. Plans to bolster apprenticeship schemes and open up new career pathways have struggled to take off. The industry has shouted itself hoarse calling for fresh, targeted efforts to grow our ranks and celebrate all the great things we’re doing, but it’s fallen on deaf ears. We’re not making meaningful progress in bridging the gap. Until we do, our recovery will be slow.
Sustainability is Learn(ing) To Fly
You might be sick of hearing this from us, but sustainability is here to stay. Better environmental practise is becoming more of a basic expectation – decent standings with environmental standards and use of more conscious materials (like those who use recycled content) is becoming the norm. Green construction is fast becoming a necessity rather than an option, hurried along by its status as a government priority.
There is a risk that the change has come too quickly for the industry, however – expectations cannot be enforced without support or adequate knowledge of the issues at hand. Moving forward, sustainability information must be better shared amongst the value chain. Our priority should be bringing our industry partners up with us in order for us to grow together.
In 2025, Things Can Only Get Better
Make no question of it – 2024 was a tough year for construction. But the groundwork for recovery seems to be in place. Industry forecasts suggest growth in output for 2025, driven by an expected revival in private housing, RMI, and infrastructure projects.
Lower mortgage rates, targeted government policies, and a promise for an economic resurrection all have enormously transformative power. We’ve still a great deal of work to do to drive renewable energy and climate resilience. The potential blockers are plentiful, but industry forecasts all point towards growth in the year ahead.
The data shows what we have always known to be true – construction is a resilient industry. This is not the first time we’ve weathered a turbulent storm, but we can safely say we’re Movin’ On Up.
