Construction outlook: poll of industry professionals

Construction professionals expect sustained cost pressures as geopolitical uncertainty persists

Construction professionals remain broadly cautious about the year ahead, with input cost expectations firmly on the upside and workload sentiment mixed, according to a poll conducted at BCIS’s latest quarterly construction outlook webinar.

The poll of around 260 professionals, the majority of whom were cost consultants and surveyors, also revealed widespread scepticism about whether recent political commitments to devolution, planning reform and increased public investment would translate into meaningful construction activity in the near term.

Dr David Crosthwaite, chief economist at BCIS, said: ‘The results paint a picture of a sector that is navigating a difficult combination of rising input costs and subdued demand. Cost pressures are real and professionals are feeling them, but workload expectations remain cautious, which suggests the market has yet to find a clear path to recovery.’

Devolution and planning reform: cautious on delivery

We asked the construction professionals whether the wave of devolution, planning reform and increased public investment associated with Andy Burnham’s Labour leadership campaign would lead to a meaningful increase in construction activity over the next two years.

Just 4% said it would. The largest share of respondents (29%) said it was unlikely, citing the gap between political ambition and delivery as too wide. A further 24% said possibly, but noted that funding mechanisms and delivery reform would need to follow. Around 23% said no, agreeing that without addressing viability, costs and skills shortages, little would change. Some 12% said it was too early to say, while 8% said they didn’t know.

Dr Crosthwaite said: ‘The scepticism reflected in these results is not surprising, and it echoes what we hear consistently from across the industry. Political commitment to infrastructure and housing investment is welcome, but the construction sector has learned from experience that announcements and activity are not the same thing. The constraints on delivery, whether viability, planning capacity, skills or supply chain readiness, do not resolve themselves simply because the political will exists. Until those structural challenges are addressed, the gap between ambition and output is likely to remain wide.’

Input cost expectations remain elevated

Looking at input costs over the next 12 months, 80% of professionals said they expected materials costs to rise. 11% thought materials costs would stay the same, 3% expected them to fall, and 6% said they didn’t know.

On the labour side, 56% anticipated a rise in labour costs, while 33% expected them to stay the same, and 4% predicted they would fall. The remaining 8% said they didn’t know.

Dr Crosthwaite said: ‘Materials cost expectations remain firmly on the upside, which is consistent with the inflationary pressures we are tracking through the BCIS General Building Cost Index. Labour is a more nuanced picture. Wage growth has been the dominant cost driver in recent years, but the pace of increase may be moderating as the catch-up effect from the post-pandemic inflation period begins to ease. That said, the National Living Wage increase in April will continue to feed through contracts over the coming months.’

Labour availability concerns persist

Concerns around labour availability also persisted, with 34% of professionals saying they expected labour availability to fall over the next year, while a further 34% expected it to stay the same, 19% expected it to rise, and 12% said they didn’t know.

The latest ONS workforce data show the construction workforce has been contracting in headcount terms.

Dr Crosthwaite said: ‘The risk is that when demand does begin to recover, the availability of skilled labour may tighten more quickly than the market anticipates. Skills shortages do not rebuild overnight, and the sector has historically struggled to scale up rapidly after periods of contraction.’

Mixed workload outlook

When asked about their own workload expectations for the next 12 months, 42% of professionals said they expected it to stay the same. Almost one-quarter (24%) said they expected a fall, while 21% anticipated an increase, and 12% were unsure.

Dr Crosthwaite said: ‘Workload expectations remain cautious, with more professionals anticipating a fall than a rise. That is consistent with the picture we are seeing in official output data and in the S&P Global UK Construction Purchasing Managers’ Index, where activity has remained in contraction for an extended period. The sector is navigating a difficult combination of rising input costs and subdued demand, and that tension is likely to persist until financing conditions improve and demand begins to recover more meaningfully.’

You can access the construction outlook poll results here.

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