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23 May 2024

Stace Outlook Index, Q2 2024 

The Stace Outlook Index brings you the latest updates on the UK economy, the industry and Tender Price Index (TPI) forecasts.

Improved but uneven recovery

The UK economy continues to gather pace as it recovers from recession. Growth in Q1 2024 was the highest for over two years, although output has been uneven. The services sector has grown strongly, but production remains flat, and construction has experienced declining output. Uncertainty also remains around how the pace and scale of interest rate cuts and the July election results will impact the economy and investment strategies.

The Bank of England (BoE) base rate has been held at 5.25% since August 2023, due to persistent inflation stemming from a still tight labour market. In May 2024, inflation is only 0.3% off the BoE target of 2%. Despite this reduction and the recent increase in unemployment, wage growth remains strong and, there is a concern that inflation could tick back up as the economy strengthens later this year.

Despite facing increased prices and pressure from staffing costs, expansion in the services sector points to renewed economic growth (S&P Global/CIPS). Meanwhile, consumer confidence also appears to be gathering pace, boosting the likelihood of stronger economic growth in the coming months (GfK).

Notwithstanding this, the outlook for the construction sector appears mixed. Despite outperforming the economy as a whole in 2023, output faded towards the end of last year and has continued to weaken in Q1 2024. Adverse weather, the continued impact of the Building Safety Act and high cost of borrowing remains a significant factor in delays and decreased activity. However, new orders did increase in the first quarter, which bodes well for the medium term.

Slower growth has taken some heat out of the labour market, but staff availability remains challenging within the construction sector. Combined with the legacy of projects procured in 2022, it has also led to a rise in the number of contractor insolvencies, which peaked in 2023 and has only recently shown signs of returning to pre-pandemic levels.

The fall in inflation to near target levels and an expected slowdown in the jobs market will likely keep the BoE on track for a summer rate cut, however, there is a question over the timing, number, and size of cuts for the remainder of this year. Markets are currently leaning towards two rate cuts of 0.25 percentage points each over the course of the year, leaving the base rate at 4.75% by the end of the year.

Growth in tender prices followed a downward trajectory in 2023, with the BCIS All-In Tender Price Index (TPI) falling to 2.9% in Q1 2024 from 8.6% in Q1 2023. A combination of muted demand amidst political and economic uncertainty and deflationary pressures is likely to see tender price growth increase at a slower pace in 2024, with industry commentators predicting an increase of around 1.0% to 3.5% for 2024. Stace’s current analysis of the data has led us to set the Stace LLP TPI all-in average forecast for 2024 at 2.0% and 2.5% for 2025.

View the Stace Outlook Index

Reference List

ONS, UK Economic Data

ONS, Construction Data


S&P Global/CIPS


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