UK Construction Industry: Q1 2025 RICS Monitor Analysis

Overall Market Conditions

The Q1 2025 RICS UK Construction Monitor shows a construction market that continues to remain largely flat, mirroring sentiment from the previous quarter. The headline workloads indicator posted a net balance of -1%, unchanged from Q4 2024, indicating stagnation in overall construction activity.

Financial constraints remain the biggest challenge for the industry, with 63% of respondents citing this as a negative impact on their operations. Planning and regulatory issues follow closely behind at 60%, while labor supply challenges, though decreasing since 2021, still affect 40% of respondents.

Worst Performing Sectors

Both public and private housing sectors continue to struggle, though they’ve shown marginal improvement. Public housing moved from -7% to -1%, while private housing improved from -5% to -2% in net balance readings. Most construction categories remain in neutral territory, showing little significant movement since Q4 2024.

Profit margins have deteriorated further, with the net balance moving deeper into negative territory at -12% (compared to -7% in the previous quarter). This marks the third consecutive decline in this metric, suggesting ongoing profitability challenges amid the current economic and geopolitical conditions.

Best Performing Sectors

Infrastructure continues to be the standout performer with a positive net balance of +13% (up slightly from +12% in Q4), maintaining its steady upward trend that has persisted since Q3 2020. Within infrastructure, the energy sub-sector shows the strongest performance with a solid net balance of +35%, unchanged from the previous quarter.

In contrast, rail infrastructure remains the weakest performer within the infrastructure category, with its workloads net balance unchanged at zero, continuing recent stagnation.

Sector to Target for Future Growth

Looking ahead to the next twelve months, infrastructure is projected to continue driving the bulk of overall growth in construction activity, posting a net balance of +32% for future expectations. While both private residential and private non-residential activity are expected to improve over the coming year (with net balances of +15% and +11% respectively), these forecasts have been scaled back compared to the previous quarter.

Energy remains the fastest-growing infrastructure sub-sector at +35%, making it the clear leader for future focus. The survey indicates positive employment expectations over the next twelve months, with a net balance of +15%, suggesting some confidence in future workload growth despite current challenges.

Conclusion

For construction businesses looking to position themselves strategically, the energy infrastructure sector presents the strongest growth potential through 2025-2026. With its consistent positive performance and strong future outlook, energy infrastructure outpaces all other construction categories and offers the best opportunity for stable workloads despite ongoing financial and regulatory headwinds affecting the broader industry.