Despite some cause for optimism in the first half of 2024, according to the latest results from the Institute of Directors Property and Built Environment Group, confidence among construction and real estate directors continues to plummet following the UK general election and the budget announcement.
Even before the Chancellor’s budget announcement, the latest IoD Property and Built Environment Group Directors’ Economic Confidence Index shows a further drop among construction and real estate directors’ confidence to -58.1 in October, down further from -33.3 in September. (See chart.)
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These sectoral results are broadly trending in line with the overall Institute of Directors (IoD) Directors’ Economic Confidence Index, which fell to -52 in October, from -38 in September. (Read the full IoD DECI press release here.)
“It is disheartening to see how much sector confidence has fallen this second half of the year,” said Richard Nelson, Chair of the IoD Property and Built Environment Group and Founder & Managing Director of Abyss Global.
“We went from firmly trending upward in the first half of the year, to absolutely falling off a cliff since July. There is real cause for concern, as some of the chancellor’s measures have not sat well with many business directors,” he added.
“However, as we noted in our 𝗕𝘂𝗱𝗴𝗲𝘁 𝗥𝗲𝘀𝗽𝗼𝗻𝘀𝗲 (https://lnkd.in/eHpPV5Qp), there is potential for optimism in a number of spending measures that should benefit the property and construction sector, including funding for housing, schools, hospitals, more planners, and a 10-year infrastructure strategy, which should give some clarity on government spending,” Nelson concluded.
Perminder Ghataore, Vice Chair of the IoD Property and Built Environment Group and Managing Director of Finance House Solutions, added: "The positive measures are mainly for the public sector, and for SME’s it is very challenging to be awarded these contracts. The housing fund top up is for affordable homes, again pushing out the SME. The biggest cause for concern is that the private sector's costs have gone up, so operating in construction is going to have even more pressure on cashflow and margins."
Ghataore went on to explain: "The base rate dropped by .25%, yet lending rates have actually gone up. The budget has removed a huge amount of confidence and added cost the PBE sector."
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