Construction recovery remains fragile amid high costs
The construction sector is recovering but its growth remains fragile as developers contend with high wages, planning delays and labour shortages.
The industry will grow over the next year due to major infrastructure projects but confidence in the housebuilding and commercial sectors remains shaken, according to a report by construction firm McBains shared exclusively with CityAM.
The sector had been in a “tailspin” as its output declined in every month for a full year, piling pressure on the Labour government’s “build, baby, build” mantra.
Construction is set to see growth of 4.5 per cent in 2026 compared to 3.5 per cent last year, according to McBains.
The growth to be enjoyed by the sector will mainly be driven by infrastructure projects in defence, transport and energy, the report said.
Meanwhile housebuilding and commercial construction will continue to struggle due to high financing costs, planning delays, labour shortages and continued cost pressures, the report found.
Tender price inflation – which measures the increase in construction costs between the time a quote is made and when the tender is submitted – will climb from 2.75 per cent this year to four per cent by 2029.
Colin McCaffrey, director at McBains, said: “The construction industry has been suffering through a prolonged period of instability and is continuing to recover from a phase of consistently and undeniably difficult market conditions.
“Although the industry is forecasting growth over the coming months, recovery will be uneven, with sectors like housebuilding and commercial projects struggling for momentum.”
Construction chief attacks minimum wage rise
Clive Docwra, the managing director of McBains, highlighted rising labour costs as a “particular concern” for the industry.
Minimum pay for 21 to 22-year-olds has risen by 33 per cent over the past three years, and the rate for 18 to 20-year-olds has increased by 46 per cent.
He said the wage rise could deter employers from hiring apprentices at a time when the construction workforce is at a record low.
Labour’s pledge to offer fully-funded training for under-25s in small and medium business is welcome, Docwra said, but does not fully address the rising employment costs which will add pressures to an already sluggish housing market.
Labour urged to back construction careers
A leading construction body is calling on the government to launch a campaign to attract young unemployed people towards jobs in the sector.
The number of young people not in education, employment or training is nearing one million, prompting calls for chancellor Rachel Reeves to do more to support Britain’s youth into work.
More than two thirds (66 per cent) of young people hold a positive view of construction but less than a third (30 per cent) would consider pursuing work in the sector, according to a report by the Chartered Institute of Building (CIOB).
David Barnes, head of policy and public affairs at CIOB, said the construction sector is “crying out” for more young workers.
Labour has pledged to build 1.5m homes by the next general election but recent estimates from the Office for Budget Responsibility suggest this target is in peril.
The Ministry of Housing, Communities and Local Government was contacted for comment.