Total construction output is forecast to fall by 2.9% in 2024 before a recovery of 2.0% in 2025, which is slightly more negative than expected three months ago.

The recent downgrade in the forecasts is primarily due to recovery in the two largest construction sectors, private housing new build and repair, maintenance and improvement (rm&i), being pushed back. This is in response to a slowdown in demand and sentiment in the broader housing market since Easter following the uptick in mortgage rates. Despite this, the forecasts for the other key construction sectors remain similar to three months ago, with many firms operating in industrial, commercial refurbishment and fit-out or working on major infrastructure projects that continue to experience robust activity.

There are both positive and negative key risks to the construction forecasts. On the positive side, the General Election occurred earlier than expected, leading to a slight increase in uncertainty for households and clients in late May and June. Conversely, this means that post-election certainty and stability will benefit economic activity, spending and investment for longer in 2024.

If the Bank of England continues to adopt an overly cautious view on keeping interest rates high for longer, this could adversely affect lending and the housing market, providing a negative risk. In addition, increasing concerns about the potential impact of uncertainty around responsibilities throughout the whole supply chain from the Building Safety Act may delay the delivery of some larger projects.

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