Construction output in 2025 and 2026 is likely to be an improvement on 2023 and
2024. However, with slower economic growth forecast and fewer interest rate cuts
expected than before the Government’s Autumn Budget last year, the construction
recovery is likely to be more gradual than in the CPA’s Autumn forecasts. After two
very challenging years, growth in private housing new build and repair, maintenance
and improvement (rm&i) is expected in both years of the forecast, albeit not as early
or as fast as anticipated back in October 2024. In addition, growth in infrastructure
and public non-housing is likely to also boost industry fortunes in 2025 and 2026. In
terms of risks to the forecasts, on the positive side, sustained real wage growth and a
willingness to spend could boost private housing rm&i activity earlier and government
injections of funding in the Autumn Budget could boost affordable housing, schools
and hospitals activity in the near-term. The main risks are on the downside, however.
Concerns over government debt may lead the government to cut public sector capital
spending and may also mean that inflation and interest rates will be higher for longer.