If construction is one of the engines that drives any economy, there was very little in Wednesday’s Budget and the accompanying forecasts from the Office for Budgetary Responsibility (OBR) to provide short term relief to the UK’s building contractors.
The OBR now expects gross domestic product (GDP) to grow by an average 1.5 per cent in the coming five years.
Back in March this year, it had previously forecast growth of 1.8 per cent.
The OBR also revised its growth forecast for real GDP for this year to 1.5 per cent, 0.5 per cent faster than the 1 per cent forecast back in March.
However, much of this increase was down to stronger growth in the first quarter of 2025, which was largely attributed to a rise in house sales before stamp duty increases and a flurry of export activity before the imposition of tariffs by the US, both of which happened in April.
Stripping out these and the UK’s economic growth remained sluggish.
“Businesses and households have faced unprecedented cost pressures and uncertainty in recent years,” said John Wilkinson, chief operating office at Bam UK and Ireland.
“The construction industry, in particular, operates on tight margins while contributing £138bn to the UK economy.”
“With inflation high, unemployment rising, and economic growth sluggish, restoring confidence is more urgent than ever if we want to get Britain building again,” he added.
“That means simpler rules, clearer regulations, and fewer barriers to infrastructure projects that deliver jobs, energy, and growth, backed by incentives, not tax hikes.”
The OBR expects the number of new houses to be added to the UK’s housing stock to fall from the average of 260,000 a year set in the early 2020s to a low of 215,000 in 2026-27.
Following that period, however, housing stock additions are predicted to rise sharply to 305,000 by 2029-30, because of reforms to the planning system.
As such, Paul Rickard, chief executive of Pocket Living noted it is “imperative that all steps are taken to remove the current barriers to delivery, including tackling the issue of viability”.
“This is especially important for the vital-to-delivery SME housebuilding sector which has the potential to deliver tens of thousands of extra homes across the country,” he added.
“While good progress has been made, now is the time to really pull every lever available to ease the housing burden and stop generation rent becoming generation debt.”
On the day, the biggest controversy in this year’s Autumn Budget was not so much the content of Reeves’ speech, but the fact that the OBR stole her thunder by releasing its economic and fiscal outlook an hour before the chancellor started her speech in the House of Commons.
It was an unprecedented mistake which Reeves wasted no time in calling a “deeply disappointing and serious error”.
For its part, the OBR apologised for the “technical error” that led to its outlook appearing on its website prematurely, and have said it had “initiated an investigation into how this happened”.
The early release of the outlook, which contained many of the measures that were outlined in the Budget shortly thereafter, had a dramatic and instant effect on shares in some of the UK’s largest construction companies.
Balfour Beatty, Keir Group and Morgan Sindall shares all fell sharply on the London Stock Exchange but bounced back shortly after the chancellor began speaking.
Most ended the day slightly higher, with shares in Balfour Beatty putting on 2 per cent and those in Keir and Morgan Sindall gaining more than 1.5 per cent each.
The OBR said the budget had increased the chancellor’s so-called headroom to £22bn which, in essence, means there is a reduced risk of her breaking her own fiscal targets, which would have led to short-term policy changes.
As such, theoretically at least, the uncertainty surrounding economic policy – which has been so loathed by construction companies and investors – has somewhat reduced.
The OBR also calculated that the probability of the UK economy achieving a budget surplus by 2029-30 is now 59 per cent, an increase from 54 per cent in the March forecast.
However, not all were impressed.
“While this is a significant increase from last year, it remains small relative to the level of uncertainty surrounding the forecast and the potential for shocks to blow the public finances off course,” said David Aikman, director at the National Institute for Economic and Social Research.
“As the OBR makes clear in its report, the chance of avoiding further fiscal resets this parliament is little better than a coin toss.”
Meanwhile, the OBR also reduced its forecast for the rate of underlying productivity over the medium term to 1 per cent, 0.3 percentage points lower than its March prediction.
“The UK’s productivity performance has undershot our forecasts, despite several substantial downgrades since 2010, as a significant rebound from recent negative shocks has not materialised,” the OBR said.
Nonetheless, this lack of a “significant rebound” led some construction industry watchers to point to a growing necessity to further marry public ambition with private enterprise in the construction industry.
“The UK is not short on government investment; it’s lacking in successful conversion and meaningful outcomes,” said Simon Toplass, chief executive officer at the procurement specialist, Pagabo Group. “But now is the ideal time to change this.
“The public and private sectors have a role to play in creating effective partnerships and sharing risk, which will ensure a financial return on investment and social legacy regardless of where the investment is sourced from.”
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