Construction Market Overview: May 2025
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Cautious Optimism Returns: Mixed Signals but Green Shoots for UK Construction in Spring 2025
The ONS have published their construction output data for March 2025 and new orders January to March 2025, showing that UK construction output was flat in Q1 2025, with no overall growth compared to Q4 2024, as over the period of January to March new work increased by 0.9% but was offset by a 1.2% fall in repair and maintenance. However, on a monthly basis, March saw a modest increase of 0.5%, driven by growth in both new work of 0.6% and repair and maintenance of 0.4%, supported by milder weather conditions. Key sectors contributing to the March uplift included private housing and infrastructure new work, which rose by 2.3% and 2.5% respectively. Meanwhile, construction new orders surged by 26.6% (£2.45 billion) in Q1 2025, led by strong gains in infrastructure and private industrial projects.
In April, UK construction activity continued to contract marking the fourth consecutive month of decline, though the rate of slowdown eased slightly, with the S&P Global UK Construction PMI® increasing to 46.6 from 44.4 seen in March, marking the highest since December 2024 but remaining below the 50.0 threshold that signals growth. Residential building showed relative resilience, while commercial work saw its sharpest drop since May 2020 amid growing economic uncertainty. Civil engineering remained the weakest-performing segment. New orders and employment both declined, and input costs remained high, especially for materials like concrete and insulation. Despite current challenges, business sentiment improved modestly, with firms expressing cautious optimism, particularly for a recovery in residential workloads over the coming year.
According to Glenigan’s Index of construction starts, UK construction starts for the three months to April 2025 rose 7.0%, with residential projects leading the way. Private housing starts surged 29% year-on-year, and social housing increased by 3%. However, Non-residential construction declined by 5% from the previous quarter and 12% year-on-year, while civil engineering starts fell 22% in both comparisons. Despite the mixed performance across sectors, the overall increase suggests a potential recovery for construction depending on confidence filtering through the supply chain.
The Construction Products Association’s Spring 2025 Forecast anticipates a modest 1.9% growth in UK construction output for the year, followed by a 3.7% increase in 2026. This outlook reflects a gradual recovery from two challenging years, particularly in the private housing and repair, maintenance, and improvement (RM&I) sectors. Private housing is expected to grow by 4.0% in 2025, despite ongoing affordability issues, high mortgage rates, and regulatory delays. RM&I activity is projected to rise by 2.0%, with growth concentrated in the latter half of the year, contingent on consumer confidence and spending. Infrastructure remains a bright spot, bolstered by major projects like Hinkley Point C and HS2. However, uncertainties such as ongoing potential U.S. tariff impacts and increased supply chain costs pose risks to the construction sector’s recovery.
Stamp Duty Changes Trigger April Slowdown in Housing Transactions Amid Stable House Prices
The HMRC report that in April the number of property transactions in the UK totalled 64,680, 63.5% than the 177,440 seen in March, and 28.0% lower than a year earlier. However, these numbers have been affected by the changes in Stamp Duty Land Tax Rates in April 2025. On 1 April 2025, the nil-rate threshold, which had been £250,000, returned to the previous level of £125,000. The decrease in transactions for April follows increased transactions in March, probably brought forward to take advantage of the higher thresholds in March. Alongside this, the Bank of England report that in March, the number of mortgages approved for house purchase fell for the third consecutive month to 64,309, which is 1.2% lower than February and 4.5% higher than a year earlier.
Nationwide report that in April 2025, UK house prices decreased 0.6% month-on month, with annual growth also slowing to 3.4% from the 3.9% seen in March, as the market is now likely to remain a soft in the coming months, following the pattern typically observed after previous changes to stamp duty rates. Halifax report that in April 2025, UK house prices increased 0.3% compared to the fall of 0.5% seen in March, with annual growth increasing to 3.2% and reaching its highest level of 2025 so far. Overall, stamp duty changes prompted a surge in transactions in the early part of 2025, as buyers rushed to beat deadline. However, this didn’t lead to a significant increase in property prices, with the last six months characterised by a stability in prices rarely seen.
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