Turner & Townsend report highlights ‘connection queue’ concerns
Although total construction output remains sluggish, the consultancy’s Summer 2025 UK Construction Market Intelligence report said that new orders in the infrastructure market had leapt by 127%, potentially leading to competition for power when areas such as housing rebound.
T&T warned clients to focus attention on navigating the impacts of a lengthening ‘connection queue’, as electricity demand rises, with the march of data centres continuing, EV charging on the up and gas is phased out.
The prediction from T7T is that infrastructure tender values will rise at a faster pace than real estate in the coming years. This is partly due to rising demand in the context of the government’s long-term infrastructure strategy and investment in the expansion of the National Grid.
Real estate tender price inflation is expected to increase from 3% in 2025 to 3.5% in 2026, while infrastructure inflation is predicted to stay at the higher rate of 4.5% in 2025, and rise to 5% over the next three years.
The firm said that material costs remain largely stable, and other inflationary factors such as the rising costs of employer national insurance contributions have been partially offset by the overall softening of construction demand.
Construction as a whole was the slowest growing sector of the UK economy in Q1 2025, and total construction output stagnated in this period, ending three consecutive quarters of growth. However, infrastructure-specific growth experienced a significant jump – with new orders more than doubling, up by 127.8%.
The connection queue
The UK’s 90-year old power grid is, in a manner of speaking, creaking, even before factors such as the growth in data centres are factored in. National Grid’s own connections assistant tool shows that most new applicants will receive connection dates in 2036 or later, T&T said.
Due to this, electricity connections could now be as major a consideration in project viability, on par with planning and funding. The delays are one element creating market uncertainty, which must be carefully managed to avoid cost pressure as construction firms could otherwise look to ‘price in’ the increased risk.
T&T said clients should prioritise power connections in their programmes early. Broad hints include ‘ramping up’ by using temporary, lower capacity connections at early dates, developing on brownfield land with existing cables – as opposed to greenfield sites – or exploring on-site power generation with flexible connections which allow excess energy to be exported to the grid. Strong ongoing dialogue with distribution network operators is key.
Stuart Sayer, North West strategic lead at Turner & Townsend, said: “The recent spending review has had a significant impact on the development pipeline in the North West of England. Designed to address security, health & public services, as well as economic growth, there are winners and losers within our sector following the shift in spending patterns.
“As ever, our industry will need to be innovative and agile in how we bring forward viable projects, deriving insight from data, efficiency from digital applications and continuing to consider the dual currencies of both cost and carbon.
“Our region is also likely to see a surge in infrastructure investment, from advanced manufacturing hubs to energy transition projects. But these large-scale programmes will be tested by the existing challenge of securing timely power connections.
“With many developments relying on network upgrades, it’s vital that clients plan early and explore flexible solutions, like phased connections or on-site generation. We will need specific approaches to and experience of working with network operators, to ensure that these regional opportunities are deliverable.”
Turner & Townsend said that the competing power needs of different construction sectors is already causing project delays in some parts of the country.
Lest anyone still doubt the power issue, National Grid’s won estimate is that UK electricity consumption will go up by 50% in the next 10 years, and double by 2050 – by which time the UK’s data demand alone will use nearly as much energy as the ocuntry’s industrial users combined use currently.
‘Rife with unpredictability’
As T&T records, businesses hare uncertainty, and H1 2025 has seen a continuation of global turbulence, not least among them continued troubles in the Middle East and guessing games over US tariffs.
The consultancy said: “For the UK construction industry, the first half of 2025 was also a waiting game, with government announcements of 10-year industrial and infrastructure strategies finally coming in June. While these strategies should boost construction activity over time, the benefits will not be immediate.”
Although activity remains sluggish, there are hints of brighter times ahead. Given the softer economic outlook and the gradual easing of inflation, financial markets are still anticipating two further Bank Rate cuts during the second half of 2025, down to 3.75%, and a further cut taking Base Rate to 3.5% in 2026.
The stimulatory impacts of these cuts, which will make development finance cheaper, are expected to transmit to construction in 2026/27, said the firm.
Construction – where’s work happening?
Construction output in Q1 grew by 0.3% from Q4 2024, the fourth consecutive quarterly rise. On an annual basis, output was up by 1.2% in Q1 2025 compared to Q1 2024.
While repair and maintenance activity accounted for a significant share of total output in 2024, in Q1 2025 new work increased by 1% on the quarter, with repair and maintenance falling slightly.
New work in the industrial sector new work expanded by 8.3%, with data centre and warehouse construction both growing rapidly. Output in new private sector housing has grown for three consecutive quarters, posting a 3.7% increase on the year in Q1 2025.
