Output hinges on government and industry rising to challenges to improve the operating environment

Mace, the global programme and project delivery consultant and construction expert, has published its Q3 2024 UK Market View, which takes consideration of interest rate reductions, stable material costs as well as pay growth. 

With economic conditions steadily improving, crucial to the success of new infrastructure and housing projects will be an improved operating environment brought about by factors such as addressing industry challenges collectively, solving labour shortages and encouraging younger workers into the industry.

The report states that, without expanding the workforce, increasing the number of houses built as well as delivering the infrastructure schemes planned will be harder to achieve.

Looking closely at the current market, Mace’s tender price inflation forecast nationally has once more not changed since earlier this year, standing at 2.5% for 2024 and 3% for 2025 and 2026. The figures for London also remain at 2%, 2.5% and 3% respectively.

For the third quarter in a row however, construction output shrank again. Although there was another increase in new orders which have risen to their highest level since Q4 2022, with infrastructure the fastest growing sector, driven by government spending.

The hope is, that as interest rates fall and confidence in the UK economy improves, key projects will be approved and support a recovery in output. The pace of any growth though will be determined by policy support to encourage investment and the industry working collectively to foster a healthier balance of risk and reward.

Oliver North, Director of Cost and Commercial Management, UK & Europe, Mace Consult said:

“The government has a number of levers at its disposal that it can use to expedite improving market conditions. Creating the right environment to attract investment and helping to solve labour shortages for example, will have the potential to have a significant impact on output.

“While economic conditions are heading in the right direction and new orders are increasing, contractors and their supply chain are still working through legacy issues and current risks which, as we’ve seen with the sad news of ISG entering administration, can carry significant human and financial cost. 

“Addressing these challenges collectively, taking a holistic approach to competition, will be a key enabler for the industry and its important role in infrastructure renewal and housing development in the coming years.”