James Todd & Co, sector specialist Chartered Accountants, highlights that the latest figures on the UK's economic performance have been underwhelming at best. Growth was just 0.1% in November, and tax rises on the horizon have dampened efforts to inject energy, enthusiasm, and positivity into investment.
Construction is one segment that has stood out as a key driver behind the slight growth figures, alongside the pub and restaurant trade—something the James Todd & Co team indicates is unsurprising, given the recent spikes in commercial spending on developments and renovations.
Understanding How Construction Industry Growth Has Counteracted Sluggish Economic Performance Elsewhere
Data published by the Office for National Statistics (ONS) highlights the gap between construction and all other UK sectors. Construction is the highest-performing sector across all markets, with outputs of +0.4% in November—without which, the +0.1% overall figure would look somewhat different.
Market reports indicate that much of this jump in activity is attributed to two niche areas, including:
- New commercial development projects, which increased by +3.1%
- Non-housing work on maintenance and repairs, with a growth rate of +1.1%
Given that the economy as a whole had flat or zero growth, these contributions made a substantial impact, with new projects contributing net outputs of +0.2% to the broader economy in the three months to November 2024.
Much of this activity is thought to be linked to sustained and increasing demand for commercial space as organisations encourage workforces to return to conventional office-based working. A lack of capacity in existing buildings has prompted developers to initiate work on new and alternative sites, often around the outskirts of the largest cities.
Another factor is that interest rates have gradually started to drop. After the Bank of England reduced the base rate from 5% to 4.75% in November, many investment projects that had stalled due to the high costs of financing have now been able to resume.
Insights Into the Construction Boom and Prospects for the Year Ahead
Kevin Coppard FCA, Partner at James Todd & Co, says, ‘Our property sector accountants, development and construction accountancy advisers had forecast improvements in the health and growth trajectory of the sector, and so while the news that construction is the best-performing market is welcome, it is not unexpected.
We've seen multiple clients sourcing and implementing robust financing strategies to inject fresh impetus into ongoing projects that had been hampered or paused by high interest rates last year. With the cautious expectation that the BoE may further reduce the base rate again in the coming months, we hope this provides a more balanced, stable market and lower borrowing costs across the board.
Inflation has also gradually and reluctantly begun to withdraw from a stubbornly high position, dropping by 0.1% to 2.5% in December—which is getting tangibly closer to the government’s 2% target.
That said, official data and statistics are just a snapshot of what has happened across each sector and industry, and it remains important to stay conscious of the bigger picture. For example, during November, we saw a dip in private sector residential construction of -1.2%—something we know the government is keen to tackle owing to housing shortages nationwide.
Although interest rates have, at last, started to fall, general costs of land remain high, which can be a barrier to housebuilding, irrespective of the demand for new homes. However, the performance of the construction market is undoubtedly positive. It sends positive signals to investors, especially when combined with inflation drops, interest rate reductions and tentative overall economic growth.’
Guidance for Construction Sector Businesses for the 2025 Trading Period
Kevin adds, ‘We are, of course, conscious of persistent challenges within the sector, not least skills shortages, and the need for ongoing and sustained investment to support ambitious government plans—but the pace at which the construction industry has picked up activity levels after a rather negatively phrased budget has been great to see.
Growth forecasts for this year remain subdued, again, an unsurprising position. Our advice for any businesses concerned about their trading projections, unsure how reforms to taxation and reliefs will affect their cash flows and bottom lines, or in need of strategic, professional support to create contingency planning, is to get in touch.
The construction industry may stand apart as a top-performing aspect of the economy, but it is also a unique market with its own opportunities and challenges. That is why skilled, customised guidance, tax management, and financial reporting remain essential to sustainable, positive growth.’
Further information about James Todd & Co's accountancy services and construction sector specialisms is available by contacting the firm directly at any of its three offices in Chichester, Fareham, and Southsea, or by reviewing the detailed service information via the firm’s website.
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About James Todd & Co
James Todd & Co have been providing accounting services for more than 30 years across Chichester, Fareham, and Portsmouth for businesses across the South East. Their clients trust them to provide bookkeeping, financial auditing and compliance, management accounting and financial advisory services.
Media Contact:
Oliver Read
James Todd & Co
01243 776938
www.jamestoddandco.co.uk
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Source Company: https://www.jamestoddandco.co.uk/
Source: Digital PR
Release ID: 1280277
