Base rate cut: a confidence booster but no silver bullet

Nicola Hodkinson is the owner and director of Seddon The Bank of England’s recent base rate cut to 5 per cent is being hailed as positive for the industry, particularly for simulating the mortgage market and the construction of new housing. The move also has the potential to attract pension funds and increase investor stakes in property development. Adding to this positive outlook, the appointment of Sarah Jones as the new construction minister is expected to provide much-needed advocacy for the sector. This, in turn, should bolster overall business confidence, supporting not just the construction industry but fostering long-term economic growth.“The industry critically needs long-term workload visibility to support sustained investment in skills”We are certainly seeing good news emerge, including a forecast from the Royal Institution of Chartered Surveyors that says the UK housing market is poised for a sales surge. But while confidence may be boosted, we must remain realistic. Yes, this is a positive sign, but it is not a cure-all for the challenges in our industry. Lower interest rates may indeed stimulate demand for construction projects, but the sector still faces hurdles, and overcoming them calls for much more than financial stimuli.Underlying challenges to growthSeveral macroeconomic factors could hinder our growth. Global conflicts are creating volatility in financial markets, which in turn could lead to fluctuating material costs and disrupted supply chains. This can make it challenging to accurately budget for projects and maintain consistent operations.The ongoing adjustments in post-Brexit international trade relationships continue to impact our workforce. Labour resources have been squeezed, particularly skilled workers, and this is driving up overall costs. The shortage not only increases project expenses but can also lead to delays and quality concerns if not addressed effectively.Additionally, the government’s £20bn budget deficit has the potential to impact public investment in crucial sectors such as housing and infrastructure. Reduced government spending could mean fewer public contracts and a slowdown in large-scale projects, affecting the industry’s growth, as well as the wider economy.The path forwardDespite these challenges, there is still room for cautious optimism. The construction industry critically needs long-term workload visibility to support sustained investment in skills and resources. Businesses that have a strong presence across public sector frameworks are able to navigate uncertainties and capitalise on public spending initiatives. Crucially, I’ve seen how these frameworks can facilitate vital apprenticeship programmes, addressing our industry’s pressing need for skilled workers while boosting local employment – creating a win-win scenario for the sector and the communities we serve. Interestingly, we are seeing a change in the industry dynamic where subcontractors and suppliers have more control when choosing their business partners. This is a welcome development that promotes higher standards of business conduct and fosters stronger, more equitable relationships across the sector. It encourages contractors to continually improve their practices, leading to a healthier industry ecosystem.The base rate cut offers opportunity, but it is not a silver bullet. Sustainable growth in our industry depends on how we address the challenges as well as the opportunities. As we progress forward, our focus must point towards developing a skilled workforce, navigating economic uncertainties and maintaining strong relationships across the supply chain. The new government’s commitment to its manifesto brings additional cause for optimism. As we await the chancellor’s autumn budget, expectations are high for increased funding in crucial sectors like housing, healthcare and education. If we can maintain this positive momentum, government and industry, the construction sector has the potential to thrive.