James Eager, director at Eric Wright Construction
According to the latest figures from the S&P Global UK Construction Purchase Managers’ Index (PMI), the construction growth rate has reached a two-year high, providing yet another indication of the sector’s resilience and adaptability, regardless of the many negative pressures it faces.
“We can now confidently plan and execute projects with significantly less fear of sudden cost escalations”
The UK construction industry has experienced a significant resurgence following the unprecedented challenges caused by the Covid-19 pandemic.
Evidence of the sector’s recovery, driven by pent-up demand and supported by favourable economic conditions, can be witnessed across both residential and non-residential construction activities.
Such optimism provides a strong foundation for well-managed and financially strong construction companies to thrive and leverage their unique strengths by tapping into accumulated demand and adjusting to new market dynamics.
During the pandemic, the sector faced unparalleled hurdles, including project delays and supply chain disruptions due to lockdowns. The significant challenges were especially hard on those companies without the financial resilience to endure such a slowdown in activity.
However, as things have gradually returned to normal, the sector has seen a robust recovery, fuelled by the need to restart previously delayed projects and the enduring demand for new builds – albeit this has been tested by increases in interest rates in recent years. But these now appear to be settling and will hopefully reduce over the short-to-medium term.
Let’s take a look in more detail at the drivers that are creating a greater sense of optimism in the sector.
Increased demand for residential construction
Due to unwavering demand for new homes, the residential sector has demonstrated substantial strength in the post-pandemic era.
Government incentives, such as brownfield funding and support from Homes England, have been crucial financial drivers of this growth, encouraging investment at pace.
Additionally, there has been a notable shift in housing needs, with rising demand for sustainable and high-quality medium- and high-rise homes in urban centres.
The growing preference for home working is spearheading this trend, as more and more people require dedicated space to work remotely, while having easy access to city centre workplaces and vibrant social settings.
The sector’s push for residential construction is a response to these changing lifestyle preferences. Anecdotally, many developers have prioritised projects that cater to the modern needs of young professionals and families.
What’s certain is that the current course of residential development is likely to continue, as urban living remains a desirable option for many, despite the rise of remote work.
Supply chain and labour market dynamics
Recent supply chain disruptions – due to the pandemic and global conflicts – led to significant challenges in the availability and cost of construction materials. But the situation has gradually improved, with inflation subsiding and energy prices stabilising.
Materials are now more accessible and prices are less volatile, which has allowed construction projects to proceed with fewer delays and cost uncertainties.
The stabilisation of material supply costs has been a critical factor in the overall growth of the construction sector. We can now confidently plan and execute projects with significantly less fear of sudden cost escalations, which has been a major concern in recent years.
Since Brexit, the sector has also navigated the challenges of a relatively unstable labour market, marked by workforce shortages, particularly in skilled trades. Collectively, the industry has addressed these challenges by offering competitive wages and attracting talent through a combination of apprenticeships, upskilling initiatives and recruitment from both domestic and international sources.
Efforts like these have been pivotal in supporting the sector’s expansion and meeting the ever increasing demand for construction services.
Looking to the future
A growing emphasis on sustainability is also boosting confidence in a construction industry that is looking forward. Projects focusing on enhancing energy efficiency, reducing carbon footprints and incorporating green technologies are increasingly prevalent.
The UK’s legally binding commitment to achieving net-zero carbon emissions by 2050 has significantly boosted the demand for greener construction practices.
For example, Passivhaus-accredited projects are becoming more common in the residential space, requiring trusted experts on and off site to ensure their delivery.
The latest PMI figures give us much to celebrate. Combined with what we hear through industry connections, it’s a good time to recognise the resilience of our sector and the power of a collaborative approach during difficult times.
