Strong client confidence and lowering interest rates present “reasons to be optimistic”, according to a new market report.
In its quarterly survey, Arcadis reported client sentiment for autumn 2024 had reached its highest level since summer 2022 and that August’s base rate cut had already borne fruit for housebuilders.
But it also warned that a full recovery for the industry would be delayed until next year.
Arcadis head of strategic research and insight Simon Rawlinson urged contractors to adopt a more commercial approach to terms as they navigate an “uncertain landscape”.
“However, the improved economic outlook offers reasons to be optimistic as we move into 2025,” he added.
Other signs of hope included stalled projects moving forwards, a boost in offshore electricity generation projects and planning consents for major road schemes.
However, Arcadis warned that labour would become the main contributor to inflation in the longer term due to tighter competence standards and reduced access to overseas workers.
It said the latest Office for National Statistics data, which showed that the workforce reduced by 2.5 per cent in the past 12 months, should “ring alarm bells”.
Arcadis highlighted the recent difficulties in introducing licensing for building control inspectors, which created fears of a capacity crunch in local government. It warned of a similar “cliff edge” when CSCS cards issued using grandfathering rights expire in December.
Material price rises will continue to create upwards pressure on companies in the initial stages of recovery, the report said, although it noted that softening steel prices were benefiting non-residential construction.
The firm maintained its previous prediction that work on site would not pick up significantly before the middle of 2025, reflecting a lag in bringing large commercial and public sector schemes forward and challenges for residential projects under the new building safety regime.
Arcadis market intelligence lead Ian Goodridge said softening interest rates will be a “welcome boost” to the sector.
He added: “However, it will still be some time before the improved levels of new orders begin to feed through to a sustained market recovery.”
