UK Construction sector set to overcome 2024 headwinds and return to growth

  • Press Release
  • 03 Sep 2024
  • PwC UK’s latest Construction and Housebuilding Outlook forecasts overall real spend contraction in the sector of -2.1% in 2024
  • 2.9% growth expected in 2025, spurred by renewed annual housing targets and continued growth in repair, maintenance and improvement work
  • New build residential sector expected to grow by 7% in 2025

Despite rebounding strongly from a c.15% Covid driven decline in 2020 and exceeding 2019’s activity levels in 2022 and 2023, the UK’s construction sector is forecast to see an overall real spend contraction of -2.1% in 2024.

This is according to PwC UK’s latest Construction and Housebuilding Outlook, which estimates the sector will return to a growth rate of 2.9% in 2025, overcoming headwinds linked to sustained high interest rates and investor caution.

PwC’s H2 2023 Outlook forecast a YoY contraction of c.4% in 2023, broadly in line with wider market commentator expectations. However, the ONS has since confirmed an in-year real growth of 7%*. This turnaround is testament to the unpredictable UK economic environment at the time, with speculation for a potential recession.

Repair, maintenance and new build sectors

Repair and Maintenance (R&M) continues to demonstrate greater resilience during challenging periods. Since 2021, R&M spend has consistently outperformed the new build construction market, and forecasts from the report expect this trend to continue in 2024.

New build output across residential, commercial and industrial settings has been negatively impacted in 2024. The private housebuilding sector in particular has been challenged by high mortgage costs and building material, product and labour inflation. Additionally, investors continue to seek clarity on key objectives, such as unlocking planning constraints, incentivising increased output from volume housebuilders, creating conditions to enable SMEs to thrive and developing viable labour force, skills and productivity strategies. These challenges are reflected in the Outlook, which expects a second year of new build residential contraction in 2024, with real spend declining by 7% vs. 2023.

A more positive outlook is set for house building from 2025 onwards, given the Government’s renewed housing targets, inflation seeing some respite and an improved interest rate environment, both of which will improve affordability. To this point, the Outlook currently forecasts growth in real spend within the residential sector of 7% (6.9) in 2025.


UK new build construction output by residential vs. non-residential sectors. £bn, 2019-2026F (2023 constant prices) Source: PwC Construction and Housebuilding Outlook, September 2024.

UK new build construction output by residential vs. non-residential sectors. £bn, 2019-2026F (2023 constant prices)

Source: PwC Construction and Housebuilding Outlook, September 2024.


“The UK’s construction sector has rebounded strongly since Covid (leading relative to other European markets) and 2023’s actual performance exceeded our and wider forecasters’ previous expectations, reflecting a strong level of activity in the second half of the year.

“Despite this positive backdrop, a range of headwinds continue to impact the sector and the market remains cautious on 2024 outturn, particularly in relation to new build residential and commercial output. This is largely due to sustained high interest rates and investor caution. Consequently, 2024 spend is expected to result in a small YoY contraction of c.2%.

“While we anticipate this small contraction in 2024, the outlook for 2025 is promising, and is testament to the sector’s adaptability and the evolving landscape of opportunities, from new build projects to growth in R&M spend to improve the quality of existing stock. We cautiously expect some potential upside to our forecast from the Labour government’s newly announced house building targets, which if achieved, could result in a significant activity uptick.”

Sam Edwards, Director, Industrials and Services at PwC UK

Notes to Editors: 

PwC UK’s Construction and Housebuilding Outlook aims to provide a quantified view on the UK’s spend outlook and a summary of drivers by segment, as well as insight into how to best position for growth in the sector. Our forecast is triangulated across publicly available information, third party reports and our regular touch points across the built environment value chain. Note that forecasted figures remain subject to change and that all charts are presented at 2023 constant prices

*Based on the ONS Dataset published on the 11th of July 2024, in Table 5a, (Dataset identifier: MVO5) the construction output in Great Britain including all work has increased by 7% between 2022 to 2023.

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