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Construction sector contracts by 0.6%: "A General Election can’t come quick enough for an ailing construction sector"

ended 28. June 2024

In official data published by the ONS this morning, it was revealed that UK gross domestic product (GDP) is estimated to have increased by 0.7% in Quarter 1 (Jan to Mar) 2024, revised up from a first estimate increase of 0.6%. It was estimated that the economy showed no growth in April 2024. The construction sector contracted by 0.6%, and Newspage asked experts why this sector is the laggard. Their views are below.

7 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
The alarming contraction in the construction sector shows the need for the next Government to have a credible housing plan. If not, construction will go from bad to worse. The growth in the UK economy is a victory for the resilience of British businesses, despite efforts from the Government and the Bank of England to stifle it in their battle with inflation. No doubt the Government will still attempt to take the credit and spin this data as a pre-election positive.
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Rohit Kohli
Director at The Mortgage Stop
The construction sector's 0.6% drop in Q1 2024 is a massive red flag. Bad weather and less new work played a part, but so did the Bank of England keeping interest rates on hold even though inflation was returning back to target. To top it off, even in this election campaign, none of the political parties have come up with real plans to tackle the housing crisis. This isn't helping anyone. Looing forward, things are still up in the air, depending on economic stability and some clear policy moves from the next Government. One positive is that mortgage rates are now edging down.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
A General Election can’t come quick enough for an ailing construction sector. There's no confidence, no incentives, no targets and no momentum. Labour will need to change planning, create a comprehensive builder and buyer incentive strategy and set local targets with penalties to really get this sector moving. Lib Dem councils have shown that this can be done locally and successfully. If Keir Starmer wants the economy to grow to fuel some of his spending plans, the construction sector is one he categorically needs to fire up.
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Adam Stiles
Managing Director at Helix Financial Partners
This isn't a surprise at all. Material and labour costs remain high, supply chain delays are a constant, land owners expect too much for their land, finance costs are higher, the planning system is in the worst shape it has ever been in and, last but not least, we've had 16 housing ministers since 2010. The most surprising thing is that the construction sector hasn't contracted more.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
The published uptick in UK GDP is a promising sign for our economy. However, the housebuilding sector remains in a lull, as builders await more favourable market conditions. With a base rate cut on the horizon and encouraging signs in the mortgage market this week, we can anticipate a resurgence in the UK house construction industry. This renewed activity will not only boost production but also contribute significantly to our economic growth.
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Dariusz Karpowicz
Director at Albion Financial Advice
It’s good to see positive GDP growth, especially when it’s a bit higher than expected. However, the contraction in the construction sector by 0.6% is not surprising. The sector is facing plenty of constraints: a lack of skilled workers to build new houses, higher material costs and ongoing economic uncertainties. The construction industry needs help and policy changes to thrive and boost new house building in the UK. Without addressing these core issues, the struggles will continue. While GDP growth is encouraging, the lack of progress in construction shows that we’re not out of the woods yet. The sector remains under pressure, and until we see a significant shift in support and resources, improvements might be slow to come. In Q2 2024, we need to keep an eye on whether these pressures ease or continue to hinder growth.
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Graham Cox
Director at Bridging Hub
New property demand slumped earlier this year due to rising mortgage rates. As a result, housebuilders have postponed major construction projects. First-time buyers, a large part of their target market, simply cannot afford the mortgage rates on offer at 90-95% loan to value. Help to Buy is not the solution. It may help housebuilders, but at the expense of unwary buyers who end up paying inflated property prices.

The good news is mortgage rates have started to fall again and we may finally get a base rate cut on August 1st.