TDUK SupplyingTimber Issue 8 DIGITAL - Magazine - Page 25
———— 2025 CONSTRUCTION INDUSTRY FORECAST ————
Key risks to beware of
While the overall outlook for
2025 and 2026 suggests a
return to growth, signi昀椀cant
risks remain. Economic
headwinds, concerns over
potential stag昀氀ation, borrowing
costs, and limited 昀椀scal
昀氀exibility, pose challenges to
both private and public sector
construction activity.
Financial markets have shown
increasing concern over the
UK's economic trajectory. Rising
government borrowing costs
in early 2025, coupled with
in昀氀ationary pressures, may
limit the government's ability
to sustain capital investment.
This could have knock-on
e昀昀ects on a昀昀ordable housing
development and public
sector-led initiatives, reducing
the anticipated construction
growth.
The trajectory of the housing
recovery, as always, remains
closely tied to mortgage
a昀昀ordability. While recent
reductions in mortgage rates
have provided some relief,
the possibility of rate hikes or
stagnant wage growth could
dampen demand once again.
Housebuilders' forecasts hinge
on a more favourable mortgage
environment, and any deviation
from this expectation could
result in downward revisions to
housing output.
Building Safety Regulations
The introduction of the Building
Safety Act, and the oversight of
the Building Safety Regulator,
although necessary, have
created bottlenecks in project
approvals, particularly for highrise developments.
Delays associated with
Gateway 2 requirements have
resulted in project slowdowns,
a昀昀ecting the viability of certain
developments, particularly in
urban centres. Resolving these
regulatory hurdles will be crucial
for maintaining momentum in
both private housing and RM&I.
A positive outlook
Despite the challenges ahead,
the outlook for UK construction
is increasingly positive. The
gradual easing of economic
constraints, improved planning
policies, and growing demand
for energy-e昀케cient housing
should support a moderate
recovery in the private housing
and RM&I sectors.
With a forecast return to
growth in 2025 and stronger
momentum expected in 2026,
the UK construction sector
is set to move beyond the
challenging stagnation of recent
years. However, sustained
policy support, stable economic
conditions, and improved
regulatory e昀케ciency will be
essential to unlocking the
sector's full potential.
SUPPLYING TIMBER
25
SPRING 2025
THE MARKET
house price in昀氀ation and the
appeal of "improve rather than
move" strategies, the RM&I
market is expected to stabilise.
Energy e昀케ciency projects,
particularly solar photovoltaic
installations and e昀케ciency
retro昀椀t work, continues to see
strong demand, supported
by government schemes such
as ECO4, the Great British
Insulation Scheme (GBIS), and
the Boiler Upgrade Scheme
(BUS). However, cladding
remediation and 昀椀re safety
concerns, while ongoing,
are unlikely to contribute
signi昀椀cantly to increased RM&I
activity in the short term due to
skills shortages and regulatory
bottlenecks.
“After a di昀케cult
couple of years, it is
a welcome return to
growth forecast for the
construction industry
in 2025 and 2026,
although the recovery is
set to be more gradual
than in our forecasts
before the Autumn
Budget.
"This recovery is
expected to occur in the
second half of the year,
combining with current
areas of growth such
as energy e昀케ciency
improvements,
commercial
refurbishments and
energy and major
infrastructure projects."
Rebecca Larkin, Head of
Construction Research,
CPA
