Top Service News
HOPE AND HARD TRUTHS
Published on
Signs of recovery in the construction sector clash with rising costs, week confidence and a cautious credit outlook.
While many commentators have shared their views on the direction of travel in the construction sector I thought it might be interesting to compare these to the experiences of Top Service members who are working in the sector.
Noble Francis, Economics Director at the Construction Products Association, regularly publishes his analysis of house building volumes and predictions using brick delivery stats as a proxy for house statistics, and they’re usually pretty accurate. Deliveries from January to May 2025 were 13.5% higher than in 2024 – as more new developments started. This is a positive trend, but he points out that even this elevated figure is 26.8% lower than the most recent peak of housing demand in 2022, and he believes it will take years to return to those buoyant levels.
The RICS (Royal Institution of Chartered Surveyors) UK Construction Monitor for Q1 2025 reported signs pointing to modest growth for the year ahead, saying “the forward-looking metrics point to a relatively modest uplift in construction workloads over the next twelve months with profitability in the sector remaining under pressure.”
Addressing demand, Bloomberg Intelligence also reported that demand for housing was higher in May 2025 than a year earlier, despite the end of the stamp duty holiday. This increase was supported by the lowest mortgage rates for several years, and an interesting insight that rates for 2-year fixed mortgages were lower than 5-year fixed deals. Bloomberg expects the 2025 annual construction growth rate to reach 4.5%.
Across business more generally, the ICAEW recently published its second quarter confidence monitor showing that business confidence in the UK had fallen to its lowest level in three years, primarily due to rising taxes and economic instability.
So how do these views compare with those working at the sharp end of construction businesses day-in, day-out. We surveyed Top Service members to canvass their experience of the first half of 2025, and their expectations for the remainder of the year. For the first half of the year, 57.8% have seen a contraction in demand, while just under half experienced growth. Expectations for the second half of 2025 reflect a similar split with 52.9% expecting contraction and 47.1% forecasting growth.
We also asked what was having the biggest impact on their customers and clients. By a significant margin, the top two issues were lack of confidence and labour costs. These match the ICAEW findings and the latter is no great surprise given the focus over recent months on the National Insurance increases.
Sadly, the prospects for credit management trends are bleak with 80.2% expecting business failures and bad debts to increase. The need to use all the tools available to support best practice risk management and collections is as vital as ever.
Government is playing its part in trying to boost the construction sector. The Construction Skills Mission Board held its first meeting in June and has a target of attracting 100,000 new workers into the industry. It will do this by focussing on five key areas to drive increased recruitment: confidence to employ and invest, clear new entrant pathways, access to provision & support to train, funding that works, reliable and rewarding careers. All laudable objectives if they are effectively implemented but the activity needs to be kept on track and not fall away like so many similar initiatives in the past.
Its intention to invest £39 billion in an Affordable Housing Programme over the next ten years is equally praiseworthy but a staggering 92.5% of surveyed Top Service members said they did not believe the Government would achieve the target, and most commentators seem to be equally sceptical.
In summary, it can be said that there are glimmers of optimism, promises of a brighter long-term future, and operational challenges for the rest of this year. Best practice credit management is going to be just as important as ever. Speaking personally, I’m proud to work with a company that helps its members meet and overcome these challenges every day.
Author: Philip King FCICM is a non-executive director at Top Service Ltd