Q2 2024
Tender Price Indicator
Many in UK construction continue to wait with bated breath for a much hoped for fall in interest rates. With development viability considerations still front and centre, a reduction in financing costs may be the key to unleash demand and move projects out of their current holding pattern.
High interest rates and elevated construction costs have made it difficult for development appraisals to stack up. This is reflected in subpar new order growth and slowing output levels on site. With construction input price inflation softening and a steadier economic outlook emerging, borrowing conditions are, for some, the last remaining barrier. The lag between Bank of England rate cuts and the availability of debt finance in the market suggests the construction industry’s problems won’t be resolved overnight. However, the initial rate cut could serve as an early indicator of a nascent recovery.
Election-related uncertainty and poor weather have stalled construction activity in recent months. Ongoing geopolitical tensions, with the potential to stoke further price pressures, have also caused some hesitation. However, sentiment in the industry appears to be improving. After lingering in negative territory for six months, the latest PMI reading consolidated its recent return to growth. Improved demand prospects stemmed from increased workloads and stronger business optimism.