Construction Outlook: January 2026

The outlook for GB construction is one of modest decline over the years 2026-2028.  Following estimated growth of 1.7% in 2025, we expect construction output to drop by 2.8% in 2026 and 0.8% in 2027

Underlying the above forecast is a weak economy, and arguably more important for construction, a depressed housing market.  Over the years 2013-2019 growth in housing new work was crucial to industry growth, with the sector accounting for more than 50% of new work growth.  With the end of Help to Buy, and elevated mortgage rates, so the housing market has taken on a much weaker stance, a position we do not expect to change much over the short-term.

Related to the above, the Government’s 1.5 million housing plan seems very much out of reach, and we do not expect it to be anywhere near met.  More likely, given current demand and building cost issues, we expect 900,000 to 1 million new houses at best to be supplied over the five years 2025-2029.

Works associated with the public sector face a challenging time given extreme fiscal pressures (as in a rising public deficit) alongside weak GDP growth.  A key concern of ours is ever growing current spending (NHS and welfare) crowding out capital spending needs.  We do not think the Government will be able to reduce the deficit as outlined in the latest OBR report.

Infrastructure has a mixed outlook.  On the one hand utility works are set to rise sharply over the forecast period, thanks in large part to rising consumer bills.  On the other hand, publicly funded works are under pressure: road construction orders are some 50% below the 2022 peak, while investment by Network Rail declined to £6.2 billion in 2024/2025 (it peaked at £7 billion in 2018), and we expect core rail investment to stay weak given HS2 expenditure commitments.