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National Insurance hike to delay construction recovery

National Insurance hike to delay construction recovery

Increases to employer’s National Insurance Contributions (NICs) next April will add an estimated 0.75%–1% to construction costs and contribute to delaying a full industry recovery to 2026.

The latest Market View report from Arcadis titled Stuck in the Middle highlights the challenges posed by stubborn inflation, escalating costs, and regulatory complexities.

Aracdis experts said a full recovery is now anticipated in 2026 – later than previously forecast.

The industry remains varied, with labour shortages, particularly in MEP trades, expected to affect data centres, energy projects, and water and electricity networks. Meanwhile, investment-led sectors such as commercial and residential will see slower growth prospects as viability issues stubbornly persist.

From 2025 onwards, construction markets are likely to diverge further as the housing market’s delayed recovery contrasts with accelerating investments in energy and water infrastructure.

Arcadis’ Winter 2024 Tender Price Forecast reflects the impact of recent budget decisions and a slowdown in workload growth in certain sectors, including high-density housing. Public sector investment is expected to ramp up gradually, reducing the immediate risk of ‘crowding out’ private developers.

The report also highlights the potential delays to high-risk buildings, especially in residential markets, as clients and contractors adjust to the new gateway requirements and approval timelines of the Building Safety Act (BSA).

Ian Goodridge, Market Intelligence Lead at Arcadis, said: “While the construction sector’s fundamentals for growth are sound, the pace of recovery will be hindered by rising costs and diminished project viability on one side, and heightened risk aversion from clients and contractors on the other.

“Despite these challenges, significant opportunities lie in the expanding energy and water sectors, where investment programmes are gaining momentum. With a resilient supply chain and strategic focus, the sector is well-positioned to recover over the medium term.”

Latest Tender Price Inflation (TPI) forecasts

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