Cosy up, reflect on the year and plan ahead

Going into 2024, the UK was emerging from a short-lived recession, grappling with interest rates that were at a 16-year high and consumer price inflation that was over double the 2% target in January. Despite these challenges, our 4Q 2023 market survey respondents were cautiously optimistic, with only a quarter of respondents forecasting fewer tender opportunities in 2024 compared to 2023. In our 1Q 2024 survey, this figure then reduced even further – to just 18%.

A year on, improving economic conditions and gradually falling interest rates have buoyed sentiment. In our latest survey, just 16% of respondents anticipated fewer tender opportunities in 2025 than in 2024, while 38% forecast an increase.

It has been an eventful year. Elections around the globe have seen changes in governments, including Trump’s second term, which will influence the construction industry. Closer to home, July’s general election saw the Labour Party win a landslide victory.

Nearly half of our 3Q 2024 survey respondents thought that the new government would be better for construction and real estate, and it was refreshing to see the industry featured in the legislative agenda set by the King’s Speech, including the Planning and Infrastructure Bill, intended to accelerate the delivery of “high-quality infrastructure and housing.”

However, longstanding challenges weigh on hopes of delivery. Only 12% of our 4Q 2024 survey respondents expressed confidence that pledges such as building 1.5 million homes and infrastructure projects will be delivered in the planned timescales.

Investor confidence emerged as the top-ranked threat to the construction industry in our latest survey, a consistent concern during the last couple of years. While industry sentiment improved steadily throughout the year — exemplified by the S&P Global UK Construction PMI reaching 54.3 in October, marking the eighth consecutive month above the neutral 50.0 threshold — concerns about public finances are influencing the outlook.

For instance, only 21% of survey respondents believe the Autumn Budget will encourage greater investment in the UK property market, with nearly 40% expecting a decline. Additionally, insolvencies and supply chain capacity remain critical issues. Over half of survey respondents were surprised by the collapse of ISG, and nearly six in ten expect further Tier One contractor failures within the next 12 months. Cash flow (53%) and pipeline stability (20%) were identified as the primary concerns for contractors.

Labour and skills shortages also remain a worry, with expectations that these will continue to mount. Recent research by Deconstruction revealed that 68% of UK adults would not consider a career in construction, associating the sector with words such as “dirty”, “strenuous” and “boring.”

There is certainly a lot to reflect on then as we approach the end of the year, but amid these challenges, there are signs of positivity. We were proud to have contributed to the successful opening of the Midland Metropolitan University Hospital, which overcame obstacles including the collapse of Carillion, space constraints, the COVID-19 pandemic and labour shortages. Lessons learnt from experiences like these will help shape responses to future challenges, including those arising from ISG’s collapse.

Interestingly, a third of our survey respondents believe ISG’s failure could drive positive industry change, such as improved margins and wider adoption of project bank accounts. Four in ten reported increased exploration of alternative procurement strategies, including target cost and incentivisation models.

This year also saw the release of the final Grenfell Inquiry report, which delivered a damning verdict on the failures of government, the construction industry and regulators that led to the tragedy. Despite this, over 80% of our survey respondents believe that the construction industry can rebuild trust — a vital priority moving forward.

Meanwhile, digital transformation continues to gain traction. Just over 40% of respondents say they have used an artificial intelligence (AI) tool to support a workplace activity. Could 2025 be the year where we see a significant breakthrough in the use of digital tools and AI to improve the design and delivery of construction projects and programmes? We hope so, as we continue to augment service delivery and improve outcomes with our digital solutions.

As we approach year-end, reflecting on 2024’s challenges and achievements provides valuable perspective. Let us embrace the lessons learned, adapt to evolving demands and prepare for successful delivery in 2025 and beyond.