Following last summer’s general election, Rachel Reeves said she planned to hold just one major fiscal event each year.
But since the start of this year, she has faced increasing pressure to show she is sticking to her own fiscal rules and maintaining market confidence.
As a result, the Spring Statement came with greater expectations for a clear growth plan than the Chancellor might have originally intended.
The construction industry evidently still needs some persuasion we’re heading in the right direction though. In a BCIS poll of more than 300 professionals, predominantly cost consultants and surveyors, the majority (54%) said the Spring Statement had made them less optimistic about the economic outlook. More than one-quarter (27%) said they felt the same as before, while just 7% felt more optimistic.
Dr David Crosthwaite, Chief Economist at BCIS, said: “Business confidence in the sector has taken a significant hit since the start of the year and there’s little evidence of real progress on the ground. In fact, we’re seeing the opposite with new orders, planning approvals and housing completions all down, and sentiment surveys reflecting a clear decline in industry confidence.
“All of this points to another challenging year for construction, with nothing in the Spring Statement to challenge that view. To bring some much-needed stability, it would be helpful for the government to bring forward the second part of its Spending Review, which has already been delayed from April to June, and could slip further. Publishing a clear, long-term pipeline of projects would go a long way in rebuilding confidence across the sector.”
When asked about their workload expectations for the next 12 months, 32% of respondents predicted a rise, while 46% expected it to stay the same. Only 12% anticipated a decrease in workload, with 10% unsure.
Materials cost inflation has been moderating since peaking in 2022 and annual growth in the BCIS Materials Cost Index was in negative territory between 3Q2023 and 2Q2024. Forecast figures for 1Q2025 show 0.8% annual growth in the index.
When we asked respondents about their expectations for materials costs over the next 12 months, 76% predicted an increase, 14% expected them to stay the same, and only 1% believed they would fall. 9% were uncertain about what lies ahead for material costs.
Labour costs continue to be the major driver of project expenses, and though annual growth in the BCIS Labour Cost Index is forecast to slow in the first quarter of 2025, increases to employers National Insurance contributions and the National Living Wage will have an impact this month. We’re forecasting labour costs to increase overall by 18% by 1Q2030.
According to our poll, 76% of construction professionals expected labour costs to rise in the next 12 months, while 13% believed costs will stay the same. Only 2% predicted a decrease, while 9% were unsure.
The issue of labour availability continues to be a concern, despite a commitment by the government to significantly boost the construction workforce. The Spring Statement included confirmation of more than £600 million to train up to 60,000 skilled construction workers over the next four years.
When asked about labour availability over the next year, 39% of respondents said they expected it to remain unchanged, while 34% expected availability to worsen. 15% said they anticipated an increase, with 12% unsure of what will happen.
Dr Crosthwaite said: “The Spring Statement’s training initiatives are welcome, but they fall well short of what’s needed. Apprenticeships take years to deliver, and we’re still half a million workers down from pre-2008 levels. In the short term, immigration would ideally bridge the gap. Long term, businesses need the confidence of a clear project pipeline before they’ll invest in training at scale.”
You can access the poll results here.
