Interest rates and low confidence

Construction firms have been hit by a barrage of reduced market confidence, high interest rates and rising national insurance costs, builders’ merchant Lords has warned, after it suffered its biggest-ever single-day stock fall.

The London-based firm released a challenging market update on Thursday, which saw its shares plunge 20.61 per cent to an all-time low of 13p. The stock is now down more than 40 per cent since the start of the year.

Chief financial officer Stuart Kilpatrick said the primary driver of the slump was a lack of confidence from markets and individuals, which has left people “sitting on their hands a little bit.”

He called on the government to streamline planning, restore stability and reduce financial pressures on business, including cutting employers’ national insurance.

“The government’s not helped us really with national insurance, which has pushed our costs up and everyone else’s costs up of employment,” he said.

Kilpatrick added that high interest rates remain a concern and that no one was “predicting an invasion of Iran in the early part of this year,” which has added further economic pressure on the sector.

The construction industry is one of the UK’s largest sectors, making up around seven per cent of GDP and employing more than two million people.

It is currently facing some of the sharpest cost rises in 30 years.

Homebuilder Berkeley warned last month that “decisive intervention” was needed from the government, cautioning that London could miss its housing targets.

Crest Nicholson reported a £35m loss, driven by higher interest rates, rising costs and deteriorating consumer confidence caused by the Iran conflict.

The sector has also seen job losses, with the S&P Global Purchasing Managers’ Index (PMI) recording “sustained job shedding.”

Tim Moore, economics director at S&P Global Market Intelligence, said the industry had also been stung by civil engineering, registering its weakest performance since the start of the pandemic.

Prime Minister Andy Burnham has pledged to unleash the “biggest council housing programme since the post-war period,” though details of the plan remain unclear.

Lords Group posted revenue of £232m in the first half of the year, which was a slight decrease compared to last year at £232.8m. 

There were some improvements, including a 17.5 per cent rise in revenues from the digital division, spares revenue rising by eight per cent, and trading in the merchanting division improving in the second quarter.

Despite this, the firm said there is no indication of significant market recovery in the second half of 2026.

The board said it expects full-year revenue of between £475m and £495m, with adjusted pre-tax earnings of £17m to £18m.

The biggest downturn came in the repairs, maintenance and improvement (RMI) and building materials business, which was down 4.9 per cent on a like-for-like basis in the first quarter, though the decline eased to 2.2 per cent in the second quarter.

“There’s just been no improvement this year from the second half of last year,” Kilpatrick said. “But we’re doing all we can to keep winning market share, keep driving the business forward and keep our costs down.”

The firm has also restructured its plumbing and heating divisions, a move it expects to save £1.5m.

“We’re just getting ourselves in the best position we can, should the market ever turn around,” Kilpatrick said.