Last week’s Spending Review finally brought some good news for the construction sector with what looks like a significant level of capital spending on infrastructure over the next decade. Investment is to be targeted at transport, energy generation, the public estate, defence and housing. However, with labour shortages persisting, the big question is does the construction sector have the capacity to deliver all of this investment?
David Crosthwaite is chief economist at the Building Cost Information Service (BCIS)
New public sector investment has been a long time coming for construction which continues to bear the brunt of wider economic stagnation. For the first time in several months, construction output outperformed the wider economy, rising by 0.9% in April compared to a decline in GDP of 0.3%. Amid trade war uncertainty and higher taxes, investment in new construction work is one way of stimulating wider demand and garnering the private sector investment needed to fuel economic growth.
The £10.2bn allocated for rail upgrades are particularly timely investments. A large proportion of domestic steel is used in the railway sector and with the UK steel industry at a crossroads pending the outcome of the UK-US tariff deal, increasing national demand for the resource could be a lifeline – steel “dumping” and competitive prices from steel imports notwithstanding.
The hope is the government’s spending plans will encourage the private sector into action, but ongoing labour capacity issues and uncertainty means there’s no guarantee new projects will be delivered on schedule or on budget.
Much of the spending outlined is long-term, spanning at least 10 years. While this gives some time to mobilise, the current picture suggests the industry is not able to meet the extra demand unless the supply position changes radically.
The latest data from the Office for National Statistics shows the construction workforce grew in the first quarter of 2025 to its highest level since 2023, but long-term trends point to an overall decline in employment. In 1Q2025, construction’s workforce had shrunk by more than 360,000 people when compared to the volume seen in 1Q2008, just before the peak of the global financial crisis. The scale of new work the government is funding will almost certainly require additional workers, but where are they going to come from?
The government’s current strategy is to build up a pipeline of domestic labour via apprenticeships and training. Ahead of the Spring Statement, the Chancellor announced a £600M investment in the construction workforce, which includes training 60,000 skilled workers, establishing new Technical Excellence Colleges and delivering more construction-focused courses in further education. In May, it was also revealed the Department for Education’s apprenticeship budget had risen to £3bn and the government has since claimed Sizewell C will create 10,000 new jobs, including 1,500 apprenticeships.
This level of investment in future skills is welcome, but the major concern is upskilling and increasing uptake in sector careers among further education students will not be enough to fill the gaps left by the withdrawal of overseas labour post-Brexit.
As the dust settles on the Spending Review, all eyes in construction now turn to the publication of the long-awaited infrastructure project pipeline. The pipeline should provide clarity on the volume and timing of upcoming projects to allow the supply chain to plan and resource appropriately to avoid potential capacity pinch points.
The Planning and Infrastructure Bill is progressing through Parliament at pace and, to a certain degree, its success in streamlining applications for infrastructure projects relies on planning capacity.
Planning professionals, like skilled workers in construction more widely, are in short supply. The problem is unlikely to disappear by investing in apprenticeships and training alone and the sooner the government realises this and reconsiders its stance on overseas labour, the better.
With another Spending Review over, only time will tell if the capital investment outlined pays off for construction and the wider economy. A failure to address lingering capacity issues could see that it doesn’t.
Like what you’ve read? To receive New Civil Engineer’s daily and weekly newsletters click here.
