The construction industry is currently facing numerous challenges, such as labor shortages and disruptions in the supply chain. A recent undercover investigation has revealed that there will be no significant increase in construction activity until at least mid-2025. This information will have significant implications for developers, contractors, and suppliers. Let’s explore the findings of this investigation and what it means for the future of the construction industry.
Construction inflation is expected to rise from 2026 due to capacity constraints caused by two-stage procurement and delays related to the Building Safety Act, according to a recent undercover report from Arcadis. The report predicts that inflation on residential and commercial construction projects will range from 5-6% between 2026 and 2028, higher than the 4% forecasted in their previous report. The consultancy stated that challenging market conditions will persist through 2024, with no substantial increase in project work until mid-2025.
Resource constraints and delayed procurements are reshaping the supply chain, leading to tighter capacity. The report highlighted stalled two-stage procurements as a key factor contributing to reduced market competitiveness and hindering the pursuit of new opportunities. Contractors are facing limitations in bidding on new projects due to commitments to stalled initiatives, creating a paradox of declining workload despite claiming to be too busy.
The report emphasized the importance of early engagement with potential bidders to avoid temporary bidding constraints. Delays in residential projects under the new building safety regulations are expected to prolong challenging market conditions. Arcadis also mentioned that slow progress in commercial and public sector projects will contribute to difficult market conditions until mid-2025.
With the upcoming election campaign, the construction sector is eagerly awaiting clear guidance from the next government on infrastructure projects and investment priorities. Despite promises of change during election campaigns, there is little indication of progress for the construction supply chain. Recent data from the Construction Products Association forecasts a 2.2% decrease in output in the construction sector this year.
Additionally, recent figures from the Office for National Statistics show a decline in construction output for the second consecutive month in March. This highlights the ongoing challenges faced by the construction industry and the need for strategic planning to navigate the current landscape.
