Confidence among construction firms has reached its highest point in nearly three years, according to a survey of accountants.
In the past quarter, construction companies reported the highest optimism out of any sector, in a regular survey carried out by accountancy trade body the Institute of Chartered Accountants in England and Wales (ICAEW).
Construction sector business confidence stood at 25.3 for Q3 2024 in ICAEW’s index, well above the national average of 14.4 for the same period. This figure represents the highest reading for construction since Q4 2021.
“The rise in confidence was underpinned by a pick-up in domestic sales and optimism that lower interest rates and government policy will boost demand,” the ICAEW said.
Businesses in the survey projected sales growth of 6.6 per cent over the next 12 months, following a rise to 2.8 per cent in the past quarter.
Just under a third (32 per cent) of businesses reported concerns about customer demand in Q3, the lowest proportion in two years.
However, high input costs remained a challenge for construction firms. Input price inflation rose for the second quarter in a row to reach 4.6 per cent. Despite this, firms expect inflation to slow to 1.8 per cent in the next year, below the 2.4 per cent projection across the whole UK economy.
However, construction lagged behind other sectors in terms of investment. In the year to Q3 2024, the construction sector reported capital investment growth of 1.1 per cent – the weakest of any UK sector in the period.
One in five construction firms in the survey said they were growing more concerned about accessing capital. Despite this, companies surveyed planned to increase capital investment by an average of 1.8 per cent next year, slightly higher than the 1.6 per cent historical average.
It follows just a day after a survey of SME construction firms revealed the sharpest rise in new work in two and a half years. The NatWest survey also revealed the highest rate of output growth for smaller construction companies since January.