The UK construction industry continues to face a mixed landscape in March, with encouraging signs in some sectors — particularly infrastructure and commercial — set against a backdrop of wider market caution. Housebuilding remains under pressure, but regional data points to growth opportunities, and a healthy pipeline of major projects promises longer-term confidence.
At Leading Edge, we monitor the construction sector closely, helping our clients understand what’s changing and how to respond. Below, we share our take on the latest market indicators and project activity shaping the outlook for 2025.
Construction Output Eases, Sentiment Still Fragile
The latest figures from the Office for National Statistics (ONS) show that construction output fell by 0.2% in January 2025, following a similar decline in December. New work was the main driver of this fall, particularly in housing, while repair and maintenance saw a modest rise.
This downward momentum is reinforced by the UK Construction PMI, which dropped to 44.6 in February – its lowest reading since May 2020. Any score below 50 indicates contraction. Housing activity was particularly weak, with the residential index falling to 39.3.
Housing Market: Demand Still Soft, but Some Signs of Life
The housing market remains constrained by high borrowing costs, affordability concerns, and planning bottlenecks. Developers have also raised alarms about the impact of additional levies such as the cladding tax, with Berkeley Group warning that this could threaten government housing targets.
That said, regional data from Glenigan provides a more optimistic view of short-term activity. Their latest Index shows that private housing project-starts increased by 31% over the previous three months, and 26% year-on-year.
Commercial and Office Development Gaining Ground
Commercial construction appears to be a key growth driver in early 2025. In the North West, Glenigan identifies 52 office projects with planning approval expected to start in the next 12 months — including the £92.5m Mayfield Quarter office development in Manchester. Meanwhile, in London, 127 office developments are in the pipeline, a strong sign of investor interest returning to the capital.
Projects like Nobu Hospitality’s new development in Manchester — a hotel, restaurant, and luxury flats — also underline continued momentum in high-end urban schemes.
Infrastructure: Big Projects Dominate 2025 Pipeline
Analysis from Barbour ABI shows that the top 100 construction projects expected to begin in 2025 have a combined value of £34 billion. Leading the pack is the £3bn London Gateway Port Building Extension, followed by Gatwick’s £2.2bn Northern Runway expansion.
At a regional level, long-term infrastructure commitments continue, including Scotland’s A9 dualling project, where major works are due to begin this spring.
Material Costs & Sector Forecasts
Forecasts from the Department for Energy Security and Net Zero project a 1.1% fall in total construction output in 2024, driven largely by housing. However, recovery is expected in 2025 (+3.5%) and 2026 (+4.6%), with strong growth anticipated in infrastructure and industrial segments.
Meanwhile, BCIS continues to flag risk from tender price increases and materials inflation, even as supply issues ease compared to the last two years.
Labour & Policy Remain Long-Term Challenges
Beyond the cyclical slowdown, deeper industry challenges remain — including labour shortages and planning constraints. Reuters recently reported that ongoing labour shortages continue to hinder growth plans — not just in housing, but also in key economic infrastructure. Without policy reform and investment in workforce skills, the sector risks missing long-term development targets.
Final Thoughts from Leading Edge
The headline numbers for early 2025 show a sector that is still under pressure — but not without optimism. Activity in commercial and infrastructure sectors is gaining pace, and a healthy project pipeline across the UK points to medium-term recovery potential.
At Leading Edge, we support construction clients across the supply chain — from product manufacturers to contractors and consultants — helping them make sense of the data and plan for the future. Whether you need help understanding your market, testing new product ideas, or gathering feedback from specifiers and customers, we’d love to help.
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