Construction sector delivers growth warning ahead of Budget

The economic growth being promised by the government is in jeopardy unless the Budget delivers a boost for the construction industry, sector leaders have warned.

Figures within the construction industry have said the delivery of key Labour infrastructure projects is at risk unless Rachel Reeves offers the “clarity and stability” needed by the sector to meet the demands of these plans.

The business confidence of construction firms is plummeting, with the sector shedding workers at the steepest level in five years.

Patricia Moore, UK managing director at professional services firm Turner & Townsend, told CityAM the construction sector is reluctant to take risks due to mixed signals from the government. 

She said: “It’s very difficult for businesses to make investments right now. We hear a lot of pausing, there’s a real degradation of confidence in businesses to invest because of that lack of clarity, it’s just very hard to plan.”

The Labour government has unveiled a series of ambitious projects which would rely on the construction sector, such as Heathrow’s third runway and its commitment to build 1.5mn homes by 2030.

Moore said: “It makes fundamental economic sense to invest in construction if you want to stimulate economic growth, and I think with this government we’ve lost a bit of the direct translation of that. 

“Successive governments in the past really understood that fundamental point, and [now] we’re not really seeing the direct correlation of those issues.”

Reeves must deliver reassurances at this week’s Budget to reassure the public that tax rises will be translated into tangible infrastructure, Moore said. 

Key projects could face a 2027 “crunch point” when they will compete for limited resources unless the sector is given a confidence boost, she said.

Jo Streeten, managing director at AECOM, told CityAM: “The combination of stubborn inflation, high interest rates and paused projects is creating real pressure across the sector. 

“While the government has set out a bold vision for infrastructure backed by a long-term strategy, a national pipeline and welcome progress on planning reform, the challenge now is turning that vision into delivery.”

Streeten called on Labour to embrace data and AI-driven tools to reduce risk and speed up timelines in the delivery of key projects.

She said: “Industry has been signalling for years that clarity and stability are essential. Uncertainty risks slowing major projects, so providing clear direction will help keep them on track and give industry the confidence to invest in the skills needed to deliver.” 

Earlier this month, the latest Purchasing Managers Index (PMI) from S&P Global showed the construction sector had tumbled to 44.1 in October, down from 46.2 in September.

The sector’s industry body Make UK said companies fear further burdens and costs from changes to inheritance tax hitting family firms along with the implications of the looming Employment Rights Bill.