Things can only get better for UK construction

Cautious optimism hangs over the UK construction industry as signs of growth begin to emerge.

Pundits disagree on the likelihood and extent of growth across the various sectors in 2026, but after years of multiple challenges plaguing the industry, most agree there are reasons to be optimistic.

The big picture

Total construction output is projected to grow by 2.4% in 2026, 4.3% in 2027 and 5.0% in 2028, according to Experian’s Spring 2026 forecasts for the construction sector.

Some small signs of growth can be seen in figures published by the Office for National Statistics (ONS) in Construction output in Great Britain: March 2026. It reports total construction output is estimated to have grown by 0.4% in the first quarter of this year compared with the fourth quarter of 2025. Repair and maintenance grew by 3.4% while new work fell by 1.9%.

A less promising view came from The Bank of England, which published an update to the Agents’ Summary of Business Conditions on 24 April, covering intelligence gathered in the 6 weeks to mid-April 2026.

“Construction output continues to fall on an annual basis, partly reflecting temporary effects of exceptionally wet weather in January and February,” states the update.

“Confidence overall has dipped further, with contacts fearing the conflict in the Middle East will lead to higher interest rates and reduce demand.”

Demand for homes

The Government’s target of 1.5 million new homes by the end of the current parliament in 2029 will, in theory, boost this sector. A massive shake up to planning law in England aims to accelerate home building, standardise local plans and alter how local planning committees operate.

The changes, driven by the Planning and Infrastructure Act 2025 and the streamlined 30-month local plan-making system introduced in early 2026 should be good news for developers because they remove some of the obstacles that historically have delayed projects.

Experian predicts the new housing sector is expected to grow by 4.4% in 2026, 9.0% in 2027 and 10.1% in 2028.

The Bank of England points to elevated costs and weak demand reducing residential construction outputs, while the Construction Products Association (CPA) expects private housing to shrink by 7.0% this year, as reported in its construction industry forecasts for Spring 2026.

Maintenance and renewals

Private housing repair and maintenance grew by 4.1% in the first quarter of the year, reports the ONS. However, the CPA expects private housing repair, maintenance and improvement to decrease by 8.0% in 2026.

Due to The National Infrastructure & Service Transformation Authority (NISTA), which was set up in April last year, and broader consideration of the country’s social infrastructure, there may be a greater focus on long-term maintenance planning for hospitals, prisons, courts and education facilities.

Commercial development

Some specialist areas of commercial development, particularly data and logistics centres, offer some hope for growth in 2026, states Colin Fraser, partner at Pinsent Masons. Increased contractual and technical standardisation should help to drive progress.

“As with logistics centre developments, these kinds of projects will bring to bear a requirement for the allocation of significant construction resource not only to the projects themselves, but project enablers and associated infrastructure,” he adds.

Energy boost

Energy and infrastructure are major drivers for construction this year. NISTA’s Infrastructure Pipeline published in March, reveals £718 billion of planned investment over the next 10 years.

Government commitments to carbon reduction are impacting investment in renewable and nuclear projects. Work continues at Hinkley Point and Sizewell, and there are major offshore wind schemes. There could be progress with onshore wind projects and the development of battery storage schemes.

What else is growing?

Other sectors with potential for growth are water, defence and transport. For water, several major capital projects are in procurement, such as HARP and run-off works from Thames Tideway, and there’s potential procurement of new schemes.

Significant work in the defence sector includes further development and upgrading of accommodation, as well as augmenting the UK industrial defence and security capabilities.

The next year will also be an important one for the continued delivery of transport schemes, including some of the largest projects currently under way in the UK.

Obstacles and opportunities

Challenges such as rising material and labour costs and skills shortages remain. Contractors must keep abreast of reforms, adopt digital technology and embrace the demands of building sustainable supply chains. The seeds have been planted but they’ll need careful nurturing.