Increased uncertainty weighs on the construction market
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As 2024 drew to a close, optimism was in the air in relation to the UK construction market as the new government enacted policies which many commentators suggested were the most development-friendly in living memory. However, the combination of a business confidence-sapping first Budget and increasingly volatile trade policy from the US has seen much of that optimism drain away. Whilst the imposition of new tariffs by the American government may have little direct impact on UK construction, the impact on wider economic sentiment has been drastic.
Indeed, the latest readings from the UK Construction Purchasing Managers’ Index confirm that construction output has fallen in the first three months of 2025, albeit with the pace of decline slowing in March. This correlates with the latest reading from the Savills Build: Perspective index, which remains broadly stable with the level posted at the end of 2024. Indeed, as Figure 2 shows, nearly all segments covered in our index are currently listed as stable for both build costs and project timescales. As the year progresses, it is difficult to see how geopolitical uncertainties stimulate greater construction output, but the likelihood of base rates falling faster than predicted may improve viability in some cases, which could stimulate demand on a sector-by-sector basis.
As 2024 ended, optimism soared in UK construction, fuelled by pro-development government policies. Recent indices reveal declining construction output and uncertain market sentiment, yet despite an underwhelming first Budget and volatile US trade policies, potential base rate cuts could spur selective growth amid geopolitical challenges
Simon Collett, Head of Professional Services
METHODOLOGY & APPROACH
Savills Building and Project Consultancy sector experts track build cost and programme timescales sentiment across 64 separate markets and sectors. A high Build: Perspective score would mean that most sectors are experiencing upward cost and timescale pressure, whereas a highly negative score would suggest that most markets and sectors are experiencing downward pressure. A score around zero suggests that build costs and programme timescales are largely static.
Read the articles within Savills Build: Perspective report below
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