Construction outlook: poll of industry professionals

Hyperinflation is behind us, but the construction sector is experiencing low demand in the face of continued high borrowing costs. While the outlook is perhaps more promising than it has been in the last couple of years, uncertainty lingers over the industry as we await the outcome of the impending general election.

With total new work output forecast to decrease by 5.5% this year, we polled more than 250 construction professionals, predominantly cost consultants and surveyors, to find out their expectations for the remainder of 2024 and first half of 2025.

When asked about their workload over the next 12 months, 42% said they expect it to rise, while 37% anticipated it staying the same. Only 12% said they were expecting a fall in workload in the next year.

Overall materials cost inflation has cooled considerably, with annual growth in the BCIS Materials Cost Index forecast to remain in negative territory until the latter half of the year.

Some prices remain historically high, though, and there is of course huge variation between materials. Members of our tender price index panel reported in June that materials linked to mechanical and electrical (M&E) work, especially in the construction of data centres, which is experiencing a huge boost, is seeing faster price increases, for example copper.

We asked our respondents what they thought would happen to materials costs in the next year. 51% said they thought they will rise, while 32% said they expect them to stay the same. 9% said they were expecting them to fall, while 9% said they didn’t know.

With materials inflation falling away, labour has been the more significant cost driver on projects. We’re forecasting annual growth in the BCIS Labour Cost Index to be 7.9% in 2Q2024 before it eases to 5.3% in the final quarter of the year.

The majority of our polled professionals – 58% – said they expect labour costs to increase in the next 12 months, with a further 31% saying they thought they would stay the same. Just 2% are predicting a fall in labour costs, and 8% said they didn’t know.

Skills shortages have been reported across the industry, though the issue of labour supply is likely being masked by decreased demand currently. We asked the construction professionals what they thought would happen to labour availability in the next year.

50% said they expect availability to stay the same, while 31% said they expect it to fall, and 11% said they thought it would rise. The remaining 9% said they didn’t know.

With the general election imminent, the professionals told us the three biggest challenges facing the next government are housing supply and affordability (60%), the industry skills shortage (60%) and sustainability and net zero targets (51%).

BCIS Chief Economist, Dr David Crosthwaite said: ‘It’s encouraging to see that 79% of the construction professionals we polled are anticipating their workload to either stay the same or increase in the next 12 months, given what we have seen with the decreases in output in some sectors.

‘However, any increase in demand is likely to lead to capacity issues. While the majority of our professionals polled didn’t expect labour availability to change, around a third expected availability to fall. Given the numbers that have left the industry since the turn of the decade and not been replaced, the expectation is that labour availability and skills issues will accompany any uptick in demand.’

You can access the poll results here.

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