‘Slow & Steady’ Growth Forecast for Construction

A leading advisor at a Cumbrian accountancy firm believes the construction sector is set for ‘slow and steady’ growth in 2025, despite a dip in activity at the end of 2024.

Joe Sullivan, partner and construction specialist at MHA, made the comments following the release of December’s S&P Global Construction PMI (purchasing manager’s index).

The PMI data showed construction output growth had reached a six-month low, but business optimism had climbed from the 13-month low of the previous month.

Mr Sullivan said:

Joe Sullivan, partner and construction specialist at Cumbrian accountancy firm, MHA

“The fall in construction PMI is hardly surprising as while the industry continues to benefit from the government’s investment in infrastructure, it is hampered by still historically high interest rates and an uptick in employment costs.

“Activity in the commercial sector remains strong, but housing has dipped.

“Whether the housing market will see a reversal in fortunes this year remains to be seen, however the opportunity to develop is clearly there given the planning reforms included in the recent NPPF.

“Overall, the construction industry has been relatively resilient in 2024 compared to other industrial sectors.

“Demand for construction is very much on a domestic level, whereas manufacturing and other industrial sectors are reliant on the global economy.

Looking forward to 2025, Mr Sullivan said:

“From what our clients are telling us, 2025 is expected to be better than last year; however, it’ll be a slow burn.

“Infrastructure will do well given the government’s investment plans as will commercial as the UK is becoming an investment choice for many.

“Housing supply will be available, but it’s whether demand will follow if interest rates remain stubbornly high.”

He noted that while high interest rates and increasing labour costs will continue to impact the industry, an increased flow of inward investment should provide some relief.

He added:

“We expect that construction PMI will hover around the same level as it is currently for much of 2025, and any spikes are likely to be short-lived.

“Although growth will be slow and steady, the fundamentals for the sector are solid and there is an air of quiet optimism.”

The S&P Global UK Construction PMI is based on responses from around 150 UK construction companies.

Source: In-Cumbria