UK construction: fragile confidence in a sector awash with rising costs and uncertainty
The UK construction sector is grappling with persistent headwinds. Growth in construction business activity has softened to the slowest pace since June 2024, according to the S&P Global UK Construction PMI. Headline construction PMI fell to a six-month low of 53.3 in December. Declining housebuilding, coupled with subdued demand conditions, persistently high interest rates, and fragile consumer confidence, have significantly impacted activity levels. Decreased levels of new construction starts were reported in 2024 outside London, as the construction sector remains less willing to take on risk amid the present economic and geopolitical backdrop.
UK real estate markets head into 2025 in ascendancy
The UK real estate market is gaining momentum, with easing inflation and stabilising monetary policy paving the way for recovery in 2025. Recovering asset values and improving financing conditions are spurring increased investment activity, liquidity and capital raising. Falling interest rates and declining borrowing costs, combined with rising rents for prime assets, are driving asset value recovery. These developments follow nearly four years of elevated borrowing costs and macroeconomic uncertainty that restrained investment activity.