Construction Market Overview: February 2025
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Construction growth remained steady in Q4 2024, but uncertainty clouds 2025’s outlook
The ONS have published their construction output data for December 2024, showing construction output grew by 0.5% in Q4 2024 compared to the previous quarter, driven solely by a 1.2% rise in new work, while repair and maintenance declined by 0.4%. However, monthly output fell by 0.2% in December 2024, with a 1.8% fall in repair and maintenance, despite a 1.1% increase in new work. At the sector level, five out of nine key sectors saw declines, most notably non-housing and private housing repair and maintenance, falling by 1.8% and 1.4% respectively. Alongside this, total new orders fell by 2.4% in Q4 2024, largely due to sharp declines in infrastructure (23.5%) and private industrial work (19.7%). Despite this, annual construction output grew 0.4% in 2024 compared to 2023, marking the fourth consecutive year of growth.
In January, UK construction activity declined for the for the first time in nearly a year, with the S&P Global UK Construction PMI® falling to 48.1 from 53.3 seen in December 2024, marking a contraction across all sectors as economic uncertainty, rising costs, and weak client confidence led to subdued workloads. Housebuilding saw its fastest decline since January 2024, while civil engineering and commercial construction also fell due to project delays and fewer tender opportunities. New orders shrank at the steepest pace since November 2023, with firms citing client hesitation and economic caution. Despite all these challenges, 38% of firms remain optimistic about future growth, though overall business confidence hit its lowest level since October 2023.
The Construction Products Association’s Construction industry forecasts for Winter 2025, expect a gradual recovery for UK construction, with output expected to grow by 2.1% in 2025 and 4.0% in 2026. This outlook follows two challenging years, particularly impacting private housing new builds and repair, maintenance, and improvement (RM&I). The recovery forecasted for 2025 has been slightly downgraded from previous estimates, considering anticipated slower economic growth, prolonged inflation, and fewer interest rate reductions than earlier expected. However, key growth drivers include major infrastructure projects like Hinkley Point C and HS2, as well as increased energy infrastructure activities. And potential challenges such as elevated mortgage interest rates, regulatory changes, and environmental considerations may influence the pace of recovery.
The Construction Products Association’s latest State of Trade Survey for Q4 2024 shows a third consecutive quarter of growth in construction product manufacturers’ sales, with 25% of heavy side and 31% of light side manufacturers reporting increased sales compared to Q3 2024. Both of which anticipate continued growth in 2025; however, they face rising wage and raw material costs, with all heavy side and 93% of light side manufacturers expecting these to increase over the next year.
The DBT construction material price index for all work decreased 0.5% month-on-month in December 2024 and decreased 0.1% compared to a year earlier. Construction material prices for new housing increased 1.3%, with repair and maintenance also increasing 1.0% and other new work falling by 1.4% in the year to December 2024.
Housing market starts 2025 with steady growth despite a softening in house prices
The HMRC report that in December the number of property transactions in the UK totalled 96,330, 2.9% higher than the 92,640 seen in November, and 18.7% higher than a year earlier, although this is compared with a low base in Q4 2023. Alongside this, the Bank of England report that in December, the number of mortgages approved for house purchase was 66,526, which is 0.7% higher than November and 27.7% higher than a year earlier.
Nationwide report that in January 2025, UK house prices increased by just 0.1% compared to December 2024, with annual growth slowing to +4.1%, from the +4.7% in seen in December marking a softening of house prices to start 2025. And Halifax report that in January 2025, UK house prices increased 0.7% recovering from the fall of 0.2% seen in December 2024. However, annual house price growth slowed to +3.0% in January, down from +3.3% seen in December and marking the slowest rate since July 2024. Finally, data from the ONS and Land Registry shows that UK house price prices fell 0.1% in December when compared to November, but annual prices rose by 4.6%.
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