The construction industry in London has experienced growth for the sixth consecutive month, signaling a robust recovery in the sector. The latest data from the S&P Global UK Construction Purchase Manager’s Index (PMI) shows a reading of 53.6 for August, a slight dip from 55.3 in July. Despite the minor decrease, any figure above the neutral mark of 50 indicates expansion.
Several factors contribute to this sustained growth. Firstly, there has been a significant increase in residential construction projects, driven by the ongoing demand for housing in the capital. London accounted for over a fifth of all residential projects started in the UK in the fourth quarter of 2023, with work worth £2.2 billion. Additionally, commercial construction has seen a boost, with numerous office and retail developments underway to accommodate the city’s evolving business landscape.
However, the industry faces challenges, including rising material costs and a shortage of skilled labor. Construction costs in the UK are predicted to rise by 3-3.8% this year, and there is a need for an extra 251,500 construction workers by 2028 to meet the expected levels of work. These issues have led to increased project timelines and budgets, but companies are adapting by investing in training programs and exploring alternative materials.
Comparing to pre-pandemic levels, the construction output in London has shown remarkable resilience. As of August 2021, the level of construction output was 1.5% below its pre-pandemic level in February 2020. However, by the end of 2023, the sector had not only recovered but surpassed pre-pandemic levels, with output now standing 4.3% higher than in February 2020. This recovery is driven by both private and public sector investments, with significant contributions from residential and commercial projects.
Deputy PM Angela Rayner stated, Our plan to Make Work Pay will bring together workers and businesses, both big and small, across different industries, for the good of the economy. This first-of-its-kind meeting has kicked off a new era of partnership that will bring benefits to everyone across the country striving to build a better life.
The Make Work Pay plan, introduced by the Labour Party, aims to boost wages, make work more secure, and support working people to thrive. Key elements of the plan include delivering a genuine living wage, banning exploitative zero-hours contracts, and ending the practice of fire and rehire. For the construction sector, this means more stable and well-paid jobs, which can attract and retain skilled workers. By ensuring fair wages and better working conditions, the plan aims to create a more motivated and productive workforce, ultimately benefiting the entire industry.
The outlook for London’s construction sector remains optimistic. With several large-scale infrastructure projects on the horizon, including the expansion of the London Underground and the development of new green spaces, the industry is poised for continued growth. The Green and Resilient Spaces Fund is supporting projects that will enhance green spaces and improve climate resilience across the city.
