What’s in store for 2025?

As 2024 is coming to an end, we look at what the figures – and some leading industry experts – are telling us about the prospects for next year.

The construction market in 2024

The consensus among analysts seems to be that the construction market as a whole has been challenging, but that the situation could have been worse. The economic environment, in particular inflation levels, had been expected to be less stable. However, the latest construction output figures for October 2024 show that construction activity remains below that of October last year.

Data from the latest Builders Merchant Building Index (BMBI), which is based on builders’ merchants actual sales (covering around 88% of the market), tells a similar story. 2024 has been a tough year for merchants, with sales in Q3 2024 down 5.1% vs. the same period last year.

The latest Plumbing & Heating Merchant Index (PHMI) data shows that plumbing and heating merchant sales have fared slightly better and are more or less flat year-to-date in 2024 vs. the same time period in 2023. But the market is not growing.

Pledges of investment in capital projects by the new Government and ambitious new targets for housebuilding are positive. However, from within the construction industry these targets are widely seen as unrealistic, with companies calling for a clearer strategy explaining how this will be achieved. Particularly in context of the skills and labour shortages the industry is facing.

The workforce within construction is shrinking, with 385,000 fewer than compared to 2019, and construction now representing the lowest % of total UK workforce for 100 years.

What can we expect in 2025?

2025 is looking brighter, but it may take time for the industry to gather momentum. Economic forecasts are cautiously positive and indicate a more stable economic environment at least, and the new housebuilding targets – realistic or not – should lead to higher levels of newbuild, which will stimulate moving and in turn refurbishment levels.

However, 2025 will not be without its challenges, as skills shortages and low profitability remain features of the market. Sustainability and digitalisation will remain key themes during 2025. A return to growth is forecast, but it will take time for new projects to stimulate growth further down the supply chain and impact merchants’ sales.

The Builders Merchants Building Index (BMBI) report for Q3 2024 includes insightful commentary by all its 14 industry experts, each representing a supply sector, plus viewpoints from GfK, the BMF and MRA Research. Their comments highlight some of the key challenges and opportunities for the year ahead.

Matt Williams, Managing Director for Polypipe Building Products, says in the report:

A key focus for Q4 2024 and 2025 will be ensuring that we, and our partners, are fully prepared for growth. Despite the lack of short-term support for growth, the government has consistently reiterated targets for housing delivery to increase substantially to 300,000 homes a year. To do this, all stakeholders in the home building supply chain must have actionable plans in place to expand output to meet potential future demand. Working together with customers to innovate and modernise is a key enabler for growth, and Modern Methods of Construction (MMC) is one of those keys. Be it via offsite construction, pre-assembled parts, optimised design, or improving on-site processes, the opportunity to revolutionise UK construction is vast. Polypipe Building Products will be front and centre of the MMC movement to create sustainable living… faster, and more of it!”

Charles Burns, Divisional Director of Brett Martin, comments:

The government’s target of 300,000 new houses a year is welcomed, and the budget did give some support to public sector new build but that isn’t sufficient to create the stimulus to meet the 300,000 new homes target.

“Cost inflation is a continuing concern, coming from both internal and external forces. The self-inflicted inflationary hit from the budgetary double whammy of increased employers National Insurance and the raised minimum wage will undoubtedly manifest themselves as price increases in the first half of 2025. The new government in the United States has also indicated the potential for a tariff driven trade war. That can only lead to increased material inflation.

“The independent merchant sector continues to outperform the overall distribution market, and we believe customer service levels and a commitment to long term strategic partnerships are central to our shared success. As a privately owned business, Brett Martin continues to invest in production and distribution capacity to ensure we can service our merchant partners when the upturn eventually arrives.”

Neil Hargreaves, Managing Director for Knauf Insulation Northern Europe, comments on some of the key influences:

What does 2025 look like beyond the numbers? Expect to see the increasing influence of a few major issues shaping construction. Sustainability and the drive to reduce not just operational carbon, but embodied carbon too. The push to reduce building risk via improved construction practices and products. And of course, real performance.

“Too often, finished buildings aren’t as efficient, as quiet or as safe as they were designed to be. Driven by changing regulations and evolving technology, 2025 will be a year of greater scrutiny, more accountability, and an increased focus on closing the performance gap.

“How will the construction industry rise to the challenge? Part of the answer lies in a more joined-up supply chain, acting with greater visibility of what happens on site.”

Gonzalo Bunse, Director of Sales and Customer Experience for Wienerberger, says:

Despite rising costs for materials like concrete and copper, signs of stabilisation are emerging, offering relief to suppliers and manufacturers maintaining margins. This is crucial for affordable housing projects with tighter budgets. Improved supply chains enhance resilience, enabling smoother progress. However, labour shortages challenge timelines and increase costs, emphasizing the need for strategic workforce planning and skills development to meet demand effectively.

“Looking ahead, government initiatives like the Get Britain Building plan offer a potential rebound in 2025. Policy shifts towards affordable housing could drive growth, address the housing shortage, and create expansion opportunities. By aligning with government goals and preparing for economic changes, the sector can navigate current challenges and emerge stronger, ready to seize future opportunities.”

You can read the full commentary from all the experts by visiting BMBI.co.uk.

How can businesses grow in 2025?

In a tough market it is more important than ever to retain a competitive edge and to pay attention to your customers. Happy customers can help you grow. And there are many ways to compete..

Competitive advantage comes from improving what needs improving. There’s no advantage in improving what’s already best in class. So, it pays to know what to improve and what to leave alone.

Many companies measure Net Promoter Score (NPS). But norms vary by country and industry. So, what is a good NPS score in UK building materials, and your product category? Our database of UK building material norms tells you. And our know-how and unique research tools help companies quickly improve their customer experience and NPS scores. So, they can grow.

As highlighted by the BMBI industry experts; to remain competitive, businesses need to ensure they are prepared for an inevitable upturn and increase in demand.

If you want to know more about measuring customer satisfaction and using insight to grow, call 07785 805 849 or email callum@mra-research.co.uk .