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Construction supply chain firms are warning that potential tax increases in next week’s Autumn Budget could derail the sector’s fragile recovery, with material costs and project delays likely to increase.
Terry Paterson, commercial director at EPD, an aftermarket parts supplier for construction machinery, said the industry is already struggling with high input prices, rising energy and transport costs, and supply chain disruption.
“If tax rises go ahead, those pressures will compound: margins will shrink, material orders may be delayed or cancelled, and that will feed upstream into manufacturing and suppliers,” he said.
The Construction Products Association has sharply downgraded its output forecasts for the sector. Total construction output is now expected to grow by just 1.1 per cent in 2025 and 2.8 per cent in 2026, down from earlier projections of 1.9 per cent and 3.7 per cent.
Private housing has seen the steepest downgrade, with output now forecast to rise by 2.0 per cent in 2025 and 4.0 per cent in 2026, compared with previous forecasts of 4.0 per cent and 7.0 per cent.
UK construction activity fell sharply in October, with the S&P Global UK Construction PMI dropping to 44.1 from 46.2 in September. It was the tenth consecutive month below the 50.0 threshold that separates growth from contraction, marking the longest continuous downturn since the financial crisis.
Paterson said EPD’s customers are reporting stagnant business, with some seeing activity down by 20 per cent. “If taxes go up, this already weak situation could collapse further,” he said.
He called for clear signalling of tax policy so suppliers and contractors can budget and plan, along with supply chain resilience support, including backing for UK manufacturing of construction products.
“The Autumn Budget is a pivotal moment for our industry,” Paterson said. “We understand the need for financial discipline, but if the government introduces policies that make houses more expensive or discourage buyers, it could derail the fragile recovery in homebuilding.”
The Budget is scheduled for 26 November.
