The Labour government has unveiled an ambitious strategy aimed at stimulating economic growth through large-scale infrastructure projects. While these initiatives promise new opportunities, their actual impact on the design and engineering sector remains mixed as we enter 2025. Budget constraints, taxation policies, and workforce shortages are shaping a more complex reality for businesses operating in this space.
Infrastructure Investment: A Double-Edged Sword
Among the most significant announcements are the expansion plans for Heathrow and Gatwick airports, the construction of a new terminal at Luton, and the Oxford-Cambridge arc development. These projects, if successfully executed, could create thousands of new jobs and generate demand for architects, structural engineers, and design consultancies.
However, many firms are approaching these opportunities cautiously. According to CADagency’s 2025 Employment Survey, 42% of design consultancies report concerns over the reliability of government funding, with 35% noting project delays due to administrative bottlenecks. While Labour’s spending promises suggest a strong pipeline of work, the reality is that economic uncertainty and rising material costs continue to slow progress.
The Tax Burden on Employers
Higher Corporation Tax and increased employer National Insurance contributions introduced in late 2024 are impacting business investment in the sector. Design consultancies, which often operate on thin margins, are feeling the pressure, with 48% of surveyed firms reporting reduced hiring plans in early 2025.
Despite Labour’s emphasis on economic stimulation, businesses are being forced to cut costs, and salary growth has started to slow. While CAD salaries rose by an average of 5.2% in 2024, projections for 2025 indicate a more modest increase of 3.8%, reflecting companies’ caution in expanding payroll amid higher operational costs.
Planning Delays and Bureaucracy
One of the main challenges facing design and engineering consultancies is the sluggish planning process. While infrastructure projects are being announced, many remain stalled in planning stages. According to CADagency’s latest industry data, 57% of firms reported project hold-ups due to delays in securing approvals, with some projects taking 12-18 months longer than anticipated.
For firms relying on a steady pipeline of projects, these setbacks can create cash flow issues, making it difficult to sustain employment levels and invest in new technologies. Streamlining planning approvals should be a top priority if Labour wants to see real progress on its economic growth ambitions.
What Needs to Change?
- Faster Project Approvals: The government must address planning inefficiencies to ensure that proposed infrastructure investments translate into actual work opportunities.
- Business Tax Relief: Temporary reductions in employer National Insurance contributions for companies involved in government-backed infrastructure projects could encourage hiring and investment.
- Stronger Collaboration with Industry: Design consultancies need greater transparency and involvement in the planning and budgeting process to ensure realistic timelines and effective resource allocation.
- Investment in Digital Transformation: Firms investing in BIM and automation should receive tax incentives to encourage adoption and improve efficiency in project execution.
Labour’s infrastructure drive presents major opportunities for the UK’s design and engineering consultancies, but challenges such as taxation, slow planning approvals, and funding uncertainty are hindering progress. If the government is serious about driving growth, it must take steps to ensure businesses can realistically capitalise on these projects. Until then, the industry remains cautiously optimistic but prepared for further hurdles in 2025.