The government’s focus on housing and infrastructure is driving renewed confidence among construction firms, according to new research by AtkinsRealis.

The consultant’s latest quarterly analysis of the sector found there is a growing optimism that output and investment will continue to rise in 2025 due to the Labour party’s plans to reform the planning system and outline a 10-year strategy for infrastructure.

The findings follow seven successive months of increasing output reported by the S&P Global UK Construction Purchasing Managers’ Index (PMI), which last month showed the fastest rise in construction activity for more than three years.

Source: HS2 Ltd

Laing O’Rourke is carrying out work on the HS2 station at Interchange, near Birmingham. This week the government suggested the scheme’s original terminus in London at Euston was on the verge of being revived

It also comes amid positive signals given by the government this week on the future of HS2’s Euston terminus, with transport secretary Louise Haigh suggesting the mothballed plan to extend the line into central London is on the verge of being revived.

AtkinsRealis is now forecasting tender prices to rise by 3% nationally for the next 12 months, up from 2.25% in 2024, as increased activity drives up tenders.

Max Wilkes, the firm’s associate director for project and programme services, said: “Suppliers are looking to ramp up production which has been reined back in the last 12 months as we are now witnessing increases in costs after a 12 to 15 month lull.”

But the report cautioned that output could still be dampened by inflationary pressures, planning delays and a reduction in suitable contractors following a string of administrations over the past year, the most recent major example being last month’s collapse of ISG.

It also highlighted that much of the recovery cycle is expected to be led by private investment vulnerable to viability concerns.

“Developers are looking for the rent and housing demand to make return worthwhile,” Wilkes said.

AtkinsRealis’ advice for firms is to avoid additional cost and delays and provide early and detailed information through the supply chain to avoid delays and cost increases.