Consultant said there had been 鈥渘o material change in the market鈥� since the summer despite hopes of a return of confidence
The Labour government鈥檚 repeated warnings about the state of the public finances have dampened any hope of a post-election bounce for the construction industry, Turner & Townsend Alinea has said.
The consultant鈥檚 latest London market report said the economy is expected to have lost momentum over the second half of this year despite expectations that falling interest rates, more stable material prices and an energised new government would lead to renewed confidence in the sector.
Labour鈥檚 concerns around what it claims is a 拢22bn 鈥渂lack hole鈥� in the public finances left by the previous Conservative government has led to major public projects being paused, including the 拢2bn Stonehenge tunnel.
This in turn led to hesitancy from investors waiting to see what the new government鈥檚 economic policy would be, the report said, warning that the pipeline of work is still 鈥測et to meaningfully harden鈥�.
Meanwhile, T&T Alinea said any optimism in the sector was being counterbalanced by 鈥渨orrisome鈥� high levels of core inflation, deepening tensions in the Middle East which could impact oil prices, volatility in some commodities including copper and the impact of Labour鈥檚 拢24bn hike in employers鈥� national insurance contributions.
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The firm has maintained its tender price inflation in London for 2024 at 2%, increasing to 3% for 2025, the same forecast in its summer report.
It said there had been no 鈥渕aterial change in the market鈥� since the summer, with questions over public finances and higher interest rates enduring.
However, it highlighted stronger growth in the capital鈥檚 private industrial and commercial sectors and pointed to S&P鈥檚 recent PMI surveys, which have suggested an increasing amount of construction work is on the horizon.
The report added that it expects output to increase as sentiment improves, although this would depend on how much money the government decides to spend on construction and how much it encourages the rest of the economy.
Meanwhile, cost consultant Exigere said it expected more developments to come forward next year as confidence improves, but warned of the effect of the UK鈥檚 subdued GDP and the slow rate at which the Bank of England is expected to cut interest rates.
The firm put its tender price forecast at 2.5% this year and 3% next year, followed by a rise of 3.5% in 2026.
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