A major credit rating agency has upgraded its outlook for building materials firms in 2025, as demand for construction projects recovers from recent lows.
Fitch upgraded its outlook for EMEA (Europe, Middle East and Africa) building materials firms in 2025 to ‘neutral’, having rated the sector as ‘deteriorating’ in 2024.
The credit rating agency forecast that higher demand for non-residential construction would drive the improvement in materials firms’ fortunes, while residential construction would take until the second half of 2025 to start recovering.
Higher infrastructure spending in the UK is also likely to boost demand for building products next year, the firm added, in view of the £650bn National Infrastructure Strategy.
Research from Fitch subsidiary BMI, cited in the report, described “mid-single-digit” percentage annual real growth in infrastructure in 2025 in the UK.
Fitch director Jacek Komor said the rosier outlook is largely driven by expectations of a recovering output and input costs returning to normal.
He said: “We anticipate a gradual recovery in the pressured new-build housing end-market starting from [the second half of 2025], together with improvement in renovation demand with improved consumer confidence.”
The report also predicted that large UK and European building materials companies such as CRH and Holcim will continue to shift towards producing sustainable light-side building materials (such as aggregates, cement and steel) while also eyeing the North American market.
“The former shift will lead to lower direct CO2 emissions, a less capital-intensive business model and an ability to offer integrated building solutions linked to the existing cement value chain,” Fitch noted.
“The benefits of greater sales to North American markets include stronger expected demand for infrastructure than most European countries, less stringent local CO2 regulations and a favourable medium-term outlook for residential construction activity.”
New York-headquartered Fitch supplies credit ratings across a range of industries throughout the world, both to sectors of the economy and individual companies.
Builders’ merchant Travis Perkins has the highest issuer default rating among the UK building products companies that Fitch tracks, at BB+. A BB grade signals some vulnerability to default risk, with flexibility in place supporting fulfilment of financial commitments.
Holcim and its fellow multinational Kingspan have a BBB rating, indicating low expectations of default risk.
