Construction firms lose hope but businesses are ‘showing resilience’
Construction firms have grown despondent about their business prospects despite signs of resilience across the UK economy, a new survey has found.
The sector is key to the housing secretary Angela Rayner’s plans to build 1.5m homes by 2030 though early signs suggest the ambitious target will not be met.
Construction saw a bigger drop in confidence than three other sectors included in Lloyds’ Business Barometer for April.
It was the lowest level of confidence recorded in more than two years.
Firms have been hit by managing disruptions in supply chains after President Trump’s slapped high tariffs on China while the costs of hiring due to higher employment taxes and shortages in skills have put more pressure on builders.
The Labour government hopes that its sweeping planning reforms can result in a reawakening but the Office for Budget Responsibility (OBR), the fiscal watchdog, predicts the benefits for construction will only come in the long term.
Manufacturing, retail and service industry firms included in Lloyds’ survey of 1,200 companies were also less optimistic about growth.
Lloyds said the overall drop in business confidence compared to data from March was largely driven by a fall in confidence in the UK economy.
Hann-Ju Ho, a senior economist at Lloyds Bank Commercial Banking, said it was “unsurprising” that business confidence took a hit after Trump provoked an all-out trade war with China.
But he also pointed out that business confidence recorded by Lloyds remains positive on the whole as levels are above the long-term average.
“Economic optimism remains higher than at the beginning of the year, showing businesses’ resilience in the face of recent challenges and overall confidence is still well above the long-term average of 29 per cent, an average taken from over 20 years of analysis,” Ho said.
Most businesses believe they will have to raise their prices in the next 12 months, reflecting the UK economy’s tricky battle with high inflation. Inflation is likely to exceed three per cent in the month of April.
London firms to increase trade
London remains more confident about business prospects than all other UK regions despite a drop of 13 percentage points compared to March.
Large proportions of firms in the capital said they would explore entering new markets, investing in staff and introducing technology including artificial intelligence.
Lloyds’ regional director for London Kirsty Sadler said businesses were “focused on driving new growth”.
“Whether that’s by entering new markets, or embracing new technology, this shows the adaptability and resilience that characterise the city’s business community,” Sadler said.
“We remain committed to supporting London’s businesses as they continue to seek new opportunities and invest in their long-term success.”
The last time Lloyds’ business barometer was in the red was in January 2021. Many pandemic restrictions were still in place at that time.
A rebound in construction could help alleviate some of the wider tensions in the UK economy.