by Richard Cosgrove | Wed 25 Jun 2025
CEA publishes latest economic briefing for members
The Government has pledged further investment in core public services, including an extra £10 billion for NHS digital upgrades and £4 billion for adult social care. Local government funding is expected to rise to £79.3 billion by 2028–29, and defence spending is projected to reach 2.6% of GDP by 2027. A headline commitment to deliver 1.5 million new homes has been set, along with £20 billion for low-carbon energy and transport. However, the bar for capital project approval is being raised, with more emphasis on private sector co-investment.
Although the UK economy shrank by 0.3% in April 2025, construction output rose by 0.9%, reflecting the sector’s continued resilience. Inflation has eased to 1.7%, and real wages are improving, but labour market data paints a more mixed picture. Unemployment rose to 4.6%, and payrolled employment fell by 55,000 over the month.
The report highlights that industrial electricity prices in the UK remain around 46% above the IEA median. A combination of market structure, gas dependency and slower investment in renewables drives the gap. While wholesale prices dipped slightly earlier this year, the cost burden on UK manufacturers remains significant. The Government is exploring reforms, including a two-way Contract for Difference model, but no quick fixes are expected.
The overall picture is mixed. There are positives: public investment in housing, green energy and infrastructure could drive future equipment demand. Policy trends also align with the sector’s strengths — including digital site delivery and Modern Methods of Construction.
However, challenges persist. High energy prices are making UK manufacturing less competitive, and ongoing uncertainty around capital project approvals could slow order pipelines. A skills shortage in green and advanced machinery operation also continues to hold back potential growth.
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