North west well placed to take advantage when construction sector picks up

The diverse geographic and sector make up of the north west means the region is well placed to benefit when the confidence finally returns to the construction sector, according to a leading industry adviser.

Joe Sullivan, Partner at Lancashire-based accountancy and advisory firm MHA, the UK member of Baker Tilly International, was reflecting on the past quarter’s S&P Global UK Construction PMI data, following the release of the latest figures for June 2026.

He believes there are still opportunities for growth for commercially astute contractors and developers, but government needs to do more to create confidence and certainty.

The latest data showed the UK construction sector remained under significant pressure in June, with the headline PMI rising only slightly to 38.4, from a six-year low of 38.2 in May. The figure remained well below the neutral 50.0 mark, indicating another sharp monthly fall in activity.

Construction output has now decreased every month since January 2025, with June’s decline the second-fastest since the start of the pandemic. Commercial construction was the most resilient part of the sector, although still in contraction, while housebuilding and civil engineering activity weakened sharply.

However, the data also pointed to some grounds for cautious optimism. Business sentiment rose to its highest level since March, while 38 per cent of firms said they expected activity to increase over the next 12 months, compared with 19 per cent expecting a decline.

Joe, who advises property and construction firms across the region, said the figures reflected the difficult environment many businesses are operating in.

He said: “Higher financing costs, higher input costs, energy prices and labour costs are all feeding into decision-making. When you put all that together, it becomes a question of why would you start a project now, put your capital on the line, or make a big investment decision? Unless you really believe in the opportunity, you will probably delay a little bit.”

However, Joe said the longer-term fundamentals for construction and property remain strong, particularly in the North West, where a broader mix of sectors and projects will generate demand, particularly as confidence improves.

He said: “The North West is an attractive place to live in terms of transport, cost of living, diversity of opportunity and amenities. This means there is a broader a mix of construction activity. There is still big demand for residential, but also for industry and logistics. There will also be construction activity that comes from sectors such as healthcare, life sciences and defence, where the North West is particularly strong. Few UK regions have this breadth of demand drivers.”

Joe said contractors are still seeing healthy pipelines of work, but start dates are moving and projects are being deferred as clients wait for greater clarity.

“The long-term demand is there; we just have a short-term confidence and certainty issue. Occupiers, investors and developers need to be more comfortable in terms of the economic outlook and the certainty of the return they are going to get before they can make confident decisions about project viability.

“From a contracting perspective, many firms’ still have substantial secured workloads extending well into 2027. But start dates are moving, probably because of uncertainty around budgets and wider conditions. In terms of secured work, many are doing okay, but there are question marks around keeping workforces fully occupied. It comes back to the sectors you work in.”

Joe said the current environment could create opportunities for businesses that are disciplined, well-managed and commercially astute.

He said: “There is a lot to be said for a well-run business that sticks to its knitting. In environments like this, those that know exactly what they do, how they do it and understand how to make money can perform strongly. Businesses with strong frameworks and repeat clients typically thrive compared to others. Unfortunately, some competitors may fall by the wayside, and the most commercially astute firms will be able to capitalise on that.”

Joe said government has a key role to play in improving confidence by providing consistency on housing, infrastructure and planning policy.

He added: “The government’s planning reform measures are moving in the right direction, but industry still needs faster planning determinations, greater local authority resourcing and more certainty around infrastructure funding. Developers and investors need confidence that once they have done their viability assessments, projects can progress efficiently and within a reasonable timeframe.

“That would be the one thing that would put smiles on faces everywhere, but it is not easy to deliver. There needs to be further legislative change, but also a significant injection of investment and quickly. It will be interesting to see the new Prime Minister’s approach here.”

Joe also highlighted labour and skills shortages as a major constraint on the sector’s ability to deliver future growth, even if planning reform accelerates.

He said: “Even if you get planning sorted, there are not enough people. The industry’s long-term challenge remains delivery capacity rather than demand. Even if planning reforms unlock projects more quickly, businesses will still need skilled site managers, engineers, quantity surveyors and tradespeople to deliver then.

“We need to invest consistently in skills. We need to elevate practical skills and apprenticeships and put them on the same level as university routes. The industry has done brilliantly in recent years in breaking down stigmas, particularly through attracting more females to the sector, but there is always more to do.”