A growing shortage of construction capacity and a risk-averse approach to new projects could put the brakes on London’s development ambitions, according to the latest research from infrastructure consultancy Aecom.
The findings, published in Aecom’s annual London Main Contractor Survey, reveal that many of the capital’s largest contractors—responsible for a combined turnover of £6bn—have already filled their order books for 2025. The slowdown in tendering activity, combined with cautious contract selection, suggests the city may face serious barriers to meeting its construction and housing targets.
Tendering activity among contractors has dropped to 60% in 2024, down from 72% last year. While still within Aecom’s “steady market” benchmark range of 60–70%, the decline indicates a hesitancy driven by ongoing economic uncertainty and the industry’s adjustment to the post-Grenfell regulatory landscape brought in under the Building Safety Act.
London’s annual housing target sits just below 88,000 homes, but only around 38,000 are being delivered on average—less than half the goal. Aecom warns that this gap is likely to widen due to persistent labour shortages in both skilled and unskilled roles. While the slower progress of housebuilding schemes currently masks the issue, the anticipated acceleration in high-rise construction—once regulatory processes become more streamlined—could reveal a critical shortfall in available workers.
Despite these headwinds, the report strikes a note of cautious optimism. Contractors are reporting a more stable market than in recent years, with a healthy pipeline of infrastructure and development projects on the horizon. London firms expect inflation to average 2.9% in 2025—marginally down on this year and closely aligned with Aecom’s forecast of 2.94%.
Brian Smith, Aecom’s Head of Cost Management, commented:
“There’s no shortage of opportunities for London’s major contractors, but the combination of tight regulations, a depleted labour pool, and economic aftershocks has made firms understandably cautious. The collapse of ISG last September was a stark reminder of the risks involved, and many are choosing stability over rapid growth.”
He continued:
“If the government is serious about delivering new homes and driving infrastructure-led growth, it must also support the industry in scaling up. This means renewed investment in skills training and addressing the post-Brexit loss of European labour—otherwise, the pipeline of planned projects may struggle to become reality.”
As the capital aims to meet future housing and infrastructure needs, the message is clear: confidence is returning—but capacity must follow.
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