Tariff Uncertainty Slows Construction

Fewer major (£100m-plus) projects are making it through to the construction stage and underlying (less than £100m) schemes have also underperformed both quarterly and annually.

While sectors like community and amenity have shown promise, with main contract awards growing 26% year-on-year, Glenigan says these wins haven’t yet translated into on-site momentum.

The review claims that delays in moving projects from contract award to construction start are prolonging a sluggish start to the year.

Planning approvals rose 8% compared to the previous quarter, with several sectors such as hospitality and leisure, showing solid growth.

According to Glenigan, these figures suggest that confidence is slowly returning to early-stage project planning which could support a recovery in project starts in the second half of the year.

The data provider’s review says that the introduction of new US tariffs on UK building materials adds further uncertainty.

UK goods now face a 10% tariff, rising to 25% for steel and aluminium, materials that accounted for a significant portion of the UK’s £1.01bn construction materials export market to the US in 2023.

Glenigan warns that a sharp decline in trade could cost the industry over £130m, while displaced global suppliers may shift focus to the UK and European markets, increasing the risk of oversupply and pricing volatility.

According to the review, the short-term outlook remains challenging for firms dependent on new project starts, but rising planning approvals and increased public sector investment provide some cautious optimism.

Allan Wilen, economics director at Glenigan, commented:

“The sharp drop in project starts reflects the ongoing struggles within the industry.

“While the surge in major contract awards and detailed planning approvals suggests a strengthening pipeline, real, sustained growth hinges on improved market confidence and the smooth conversion of approvals into on-site activity.”

Source: Development Finance