Output is forecast to fall by 2.9% this year, steeper than the 2.2% contraction forecast three months ago. This is primarily due to recovery being pushed back in the two largest construction sectors, private housing new build and repair, maintenance and improvement (rm&i).

This is forecast to remain the case until the Bank of England begins cutting interest rate cuts and consumer confidence strengthens.

In addition, increasing concerns about the potential impact of uncertainty around responsibilities throughout the whole construction supply chain from the Building Safety Act may also delay the delivery of some larger, high-rise projects.

The sector’s recovery is now forecast to be in 2025, with growth of 2.0% and a further rise of 3.6% in 2026. It is expected that the lagged impacts of lower interest rates combined with sustained real wage growth will improve consumer and business confidence.

This is in addition to greater economic and political certainty as the new government develops its spending plans.

In private housing – the largest construction sector – optimism early in the year faded after Easter. Mortgage rates ticked higher in response to revised expectations that the Bank of England would start cutting interest rates later than previously anticipated.

As a result, recovery for the broader housing market and private house building sector has been pushed back.

This year will remain challenging for house builders given both the demand side weakness and supply side constraints such as planning for nutrient and water neutrality, Biodiversity Net Gain.

There is also some supply chain uncertainty regarding responsibility and liability under the Building Safety Act and hold-ups at the pre-construction Gateways, which is also likely to be an issue in high-rise public housing and commercial.

After last year’s double-digit fall, private housing output is forecast to fall by a further 7.0% in 2024, followed by a rise of 6.0% in 2025.