Rising Interest Rates and Housing Slump Hit Construction Hard
The UK infrastructure projects, and the construction industry is facing a challenging year, according to the latest forecast from the Construction Products Association (CPA). Growth in the sector is now forecast to contract by 2.9% in 2024, a steeper decline than the previous 2.2% predicted merely three months ago.
The primary cause of this downward revision is the prolonged weakness in the housing market. High interest rates and subdued consumer confidence have delayed recovery in construction. While the Bank of England is expected to begin reducing interest rates later this year, the CPA anticipates a more significant rebound in construction to occur in 2025.
The construction industry is also grappling with uncertainties surrounding the Building Safety Act, which could further hinder progress on large-scale projects. Despite these challenges, sectors outside of housing, commercial property and infrastructure, continue to perform better.
Rebecca Larkin, CPAs head of construction research, expressed concern over the impact of interest rates on housing and highlighted the ongoing skills shortage as a major risk to long-term growth. She also noted the potential for positive changes from the new government’s planning policies but emphasized the need for further details.
With a projected recovery in 2025 and beyond, construction is anticipating improved economic conditions and more government support to navigate current difficulties.
Sources:
Lack of interest rate cuts hindering construction recovery | Project Scotland
