Arcadis warns ‘meaningful’ recovery now not expected until end of this year

Arcadis has said that a proper recovery in the sector is not expected until later this year.

The consultant said in its spring survey: “With low confidence, high finance costs and sluggish growth continuing to hold back commercial and residential recovery, any meaningful rebound is unlikely before late 2025.”

The firm added: “While government reforms aim to deliver long-term growth, the short-term outlook remains challenging. The timing of public investment in building projects is dependent on the Comprehensive Spending Review and local government devolution, leaving developers with limited options to overcome viability constraints.”

It said new build construction output increased for the second consecutive quarter in Q4 2024, driven by rising demand in the public-non-residential and industrial sectors. But it said overall new build workload remains well below 2022 and 2023 levels, with total output in 2024 down 5.3% year-on-year in real terms.

Simon Rawlinson, Arcadis head of strategic research and insight, said: “New orders have dropped sharply, and while infrastructure investment is set to rise, commercial and residential recovery remains sluggish due to low confidence and high finance costs. The shift towards low-rise residential schemes highlights ongoing regulatory challenges, while resource constraints in the resilience sector could drive inflationary pressures.

“Without renewed investor confidence and strategic government action, a sustained recovery is far from guaranteed.”

Last week, new PMI data said waning confidence had got worse in February with the S&P Global UK Construction Purchasing Managers Index sinking to 44.6, down from 48.1 in January, the second consecutive fall below the 50 no-change threshold since February last year.

The latest reading is the lowest for nearly five years with the fall in housebuilding output the steepest decline since 2009, notwithstanding the collapse caused by the pandemic.