Introduction

The construction industry's prospects at the start of 2025 are finely balanced. Output and sentiment are broadly flat, but with the Chancellor Rachel Reeves confirming her support for a raft of growth-boosting projects, construction is front and centre of the Government's drive to 'kickstart growth' in the UK economy.

Serious question marks remain about the construction industry's ability to deliver the surge in output demanded of it. While materials cost inflation has cooled significantly since its post-pandemic spike, labour supply and labour costs remain a major concern.

Labour shortages within the construction industry have been a recurring issue in recent years. Our contractor survey identifies skilled labour shortages as the primary challenge affecting construction delivery, surpassing rising costs. With labour costs set to surge in April due to a 15 percent increase in employers' National Insurance contributions, this problem may worsen.

This edition of the UK market intelligence report will examine how construction's people problem got so bad, and how to mitigate the double threat this puzzle now poses to projects - as both an inflationary driver and a risk to schedule and capacity.

At a glance

4.5%

Bank Rate cut to 4.5 percent

0.9%

Construction output grows by 0.9 percent in 2024

6.9%

Average weekly earnings in construction rose by 6.9 percent in year to November 2024

UK market intelligence report

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