A 21% increase in project starts in last quarter with residential and industrial the most active sectors are the latest findings from RLB Northern Ireland’s latest Construction Market Intelligence report.
However, wastewater capacity issues are delaying the construction of approximately 8,450 homes, equating to nearly £1 billion of stalled investment. The largest investment sector so far this year has been retail, representing nearly 55% the total investment spend. Growth outlook heading into 2025 is modest with a continued demand in the hotel sector demonstrating the region’s growing appeal as a destination.
Noel Devine, Partner at RLB Northern Ireland comments, “We have seen a good level of activity in the last quarter with over 20% increase in project starts. Residential, industrial and retail remain the sectors most active but we are also seeing growth in the hotel and leisure sector which we predict will remain in 2025.”
Construction tender price inflation on stable trajectory despite rising input costs
No significant breakout in tender prices is expected in the UK construction sector even though input costs continue to rise. The RLB weighted average of tender price uplifts, weighted by regional volume of ONS New Orders, shows a very slight firming of tender price movements at a national level, which RLB says is reflective of recent workload uplift and expectations of upcoming spend from the public sector.
As of Q4 2024, RLB’s forecast tender price uplift for 2024 is 3.03%, slightly up from its previous quarter’s forecast of 2.97%. Although these changes are in the upward direction, they are only very slight and as such do not represent any great expectation of a price breakout, even though input costs continue to increase at a slightly higher rate overall next year.
The BCIS Tender Price Index for 2024 is lower at 2.23% than RLB’s national overview, but the indexes correspond more closely next year, before reporting similar numbers from 2026 onwards. The BCIS tender price uplift figure is outstripped by the BCIS General Building Cost Index, which currently forecasts cost figures uplifting by 2.89% this year, with 3.22% to come next year. Further, the upcoming changes to National Insurance Contributions (NIC) will affect labour costs. According to BCIS, the long-term trend of +2.5% per annum will only return in 2027. Ongoing labour cost increases for 2024 are over +5%, with +6.5% forecast for 2025 before falling back to more familiar territory.
While costs generally remain on an upward curve overall, there are clear indications of falls in some producer price levels, in particular, for steel and timber products. For fabricated structural steel, the fall is recorded as being almost 7.5%, which obviously bears proportionately more heavily on steel-framed building solutions. Looking ahead, fuel cost changes may again feed into this equation, as will undoubtedly the impact of increasing infrastructure spend incorporating large volumes of reinforced concrete and fabricated steel sections. This suggests increasing pressure on margins as contractors move to refill order books. A significant increase in available workload could further exacerbate any tender price instability.
To read the Q4 edition of Construction Market Intelligence, visit Construction Market Intelligence UK Edition Q4 2024 – RLB | Europe