Respondents to our 4Q 2024 survey identified investor confidence, insolvencies/supply chain capacity and interest rates and inflation as the top three threats to construction. Despite these challenges, industry sentiment improved steadily throughout the year. Notably, the S&P Global UK Construction Purchasing Managers' Index (PMI) reached 54.3 in October, marking the eighth consecutive month above the neutral 50.0 threshold. The latest reading was also well above the average seen in the first half of the year (51.4).

Our sentiment analysis tool calculated a sentiment score of 56%, reflecting a balance between cautious optimism and lingering uncertainty. While improving economic conditions and new funding for construction projects announced in the Autumn Budget are positive developments, rising costs — particularly the planned increase in employer National Insurance contributions — remain a concern.

There are also concerns about capacity, given ongoing labour and skills shortages and the impact of recent high numbers of insolvencies. ISG's collapse has had far-reaching impacts, including disruptions to the supply chain, further insolvencies among dependent businesses, the challenge of retaining its staff within the industry, and increased pressure with other contractors stepping in to complete in-progress and planned projects. Lendlease also continues to divest its UK construction business, again reducing the pool of contractors.

Feedback signals that the supply chain continues to be risk averse. Many businesses remain selective in the opportunities they pursue, with limited willingness to engage in single stage tendering. Constraints in certain parts of the subcontractor supply chain, such as M&E, are contributing to elevated pricing.

In our latest survey, just 16% of respondents anticipated fewer tender opportunities in 2025 than in 2024, while 38% forecast an increase. The implications of capacity constraints and a cautious supply chain will become more apparent as activity levels rise.

As per our previous advice, inflation must be assessed on a case-by-case basis. Factors such as size, sector, specification and procurement and tendering strategies can significantly influence tender prices. Additionally, understanding regional and sector-specific market dynamics remains crucial as these factors shape supply chain appetite and pricing.