Construction project starts fall 21% as tariff pressures mount

Construction project starts continued to fall in Q1 2025, reflecting a sector still held back by economic uncertainty, cautious clients, and now, growing concerns around international trade.

According to Glenigan’s April 2025 Construction Review, the value of project starts dropped 4% compared to the previous three months and fell sharply by 21% year-on-year.

The latest data paints a mixed picture: short-term delivery is under pressure, but the development pipeline is showing early signs of strengthening.

Project Starts Continue to Decline

Activity on-site remains subdued. Fewer major (£100m+) projects are making it through to the construction stage, and underlying (<£100m) schemes have also underperformed both quarterly and annually.

While some sectors have shown promise, Community & Amenity, for example, saw main contract awards grow 26% year-on-year, these wins haven’t yet translated into on-site momentum. Delays in moving projects from contract award to construction start are prolonging a sluggish start to the year.

Planning Approvals Offer a More Positive Outlook

One brighter development is the uptick in detailed planning approvals. Overall, approvals rose 8% compared to the previous quarter, with several sectors showing solid growth:

• Hotel & Leisure: up 20% year-on-year, supported by consistent investment in the hospitality sector
• Education: up 17% year-on-year, boosted further by a 21% increase in capital funding in the 2025/26 budget
• Civil Engineering: a standout performer, with planning approvals up 176% quarter-on-quarter

These figures suggest that confidence is slowly returning to early-stage project planning. If sustained, this could support a recovery in project starts in the second half of the year.

Detailed plans have been approved for the Beeslack Community High School Replacement development in Roslin, Lothian, Scotland. (Glenigan ID: 19316062). 

Trade Disruption Adds New Pressure

On top of existing challenges, the introduction of new US tariffs on UK building materials adds further uncertainty. UK goods now face a 10% tariff, rising to 25% for steel and aluminium, materials that accounted for a significant portion of the UK’s £1.01 billion construction materials export market to the US in 2023.

Most UK exports in this space are manufactured components, leaving domestic producers particularly vulnerable. A sharp decline in trade, similar to post-Brexit patterns, could cost the industry upwards of £130 million.

There are also indirect risks. Displaced global suppliers may target the UK and European markets instead, raising the possibility of oversupply and pricing volatility. Contractors, specifiers, and manufacturers are being advised to keep a close eye on costs and secure specifications early where possible.

Looking Ahead

The short-term picture remains challenging, particularly for firms reliant on new project starts. However, rising planning approvals and increased capital investment in key public sectors offer some grounds for cautious optimism.

As Allan Wilen, Economics Director at Glenigan, puts it:
“The sharp drop in project starts reflects the ongoing struggles within the industry. While the surge in major contract awards and detailed planning approvals suggests a strengthening pipeline, real, sustained growth hinges on improved market confidence and the smooth conversion of approvals into on-site activity.”

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