1

Macroeconomic landscape increasingly challenging

Global factors driving up the cost of borrowing have effectively eliminated the financial headroom that the Government calculated at the time of the Budget. Markets are anticipating fallout from the likely downturn in the US economy following the introduction of tariffs. This could drive up material costs. Project teams will need to be flexible in how they procure materials to avoid a knock-on impact on project budgets.

2

Construction resilient but uncertainty holding back growth

Since Covid, construction output has grown steadily, if modestly, year-on-year. New order data suggests that much of the project backlog is progressing, but cautiously and stage-by-stage. Project teams must reconfirm viability at the end of each stage to pass rigorous gateway reviews and progress to the next.

3

Economic metrics improving – but slowly

Overall, inflation and interest rates are expected to keep trending downward. This will be essential to create a favourable investment climate, and to support the Government’s plans to borrow to invest.

4

Labour market and insolvencies

Volatility in the supply chain and the labour market remains a concern. Bank of England data suggests that half of businesses are likely to reflect increases in employment costs in output prices. Cost managers will need to carefully manage these increases within project budgets.

5

Material costs easing

Increasing labour costs are being, in part, offset by falling material prices. Fabricated steel and bar reinforcement continue to experience the biggest price falls. However, we need to stay alert to the impact of global tariffs. Project teams will need to remain flexible in how they select and procure materials and products to avoid unbudgeted cost increases.

6

Regulatory impact on project timelines

Meeting the Building Safety Act’s requirements is an on-going issue. This is extending project timelines, adding 12 to 20 weeks to the schedules of larger developments. This is affecting planning and delivery schedules.