Glenigan's UK Construction Industry Forecast for 2025-2026 predicts that construction project starts will continue to gain momentum as the UK economy strengthens. This growth is expected to be driven by a combination of factors, including improving consumer and business confidence, which will boost the industry as a whole.
Renewed Growth
Renewed construction growth is forecast for both 2025, with an 8% increase, and 2026, with a 10% increase. This recovery is largely due to the prospect of a recovering market, which is expected to lift consumer and business confidence, ultimately benefiting the industry. Since the election, project starts have stabilised, and private sector work has seen a gradual rise during the second half of 2024.
Main contract awards are currently standing 7% higher than 2023 figures, supporting a renewed rise in industrial and office starts as investor confidence improves. Firm development pipelines are also pulling through, which will contribute to the growth of the construction sector.
On track for growth from 2025
Commenting on the forecast, Allan Wilen, Glenigan's Economic Director, said: "The construction sector is on track for growth from 2025, driven by a combination of improved consumer confidence, increased household spending, and strategic fiscal changes announced in the recent Budget. These factors will drive activity in consumer-related verticals such as private housing, retail, and hotel and leisure." He added that the Budget's adjustments to fiscal rules, allowing for higher levels of capital investment, will unlock significant public sector and infrastructure projects, providing a much-needed boost to government-funded initiatives over the next two years.
Private housing market activity has stabilised during the second half of 2024, thanks to a brighter economic outlook and improvements in household incomes. This may prompt buyers to take advantage of reasonable house prices, supporting further recovery during 2025 and 2026 as housebuilders respond to improved consumer confidence and strengthening property transactions. The housing market is expected to grow by 13% in 2025 and 15% in 2026.
Planning reforms likely to help new house building
While housing approvals have been on a downward trend for most of 2024, government planning reforms are anticipated to reverse this trend, paving the way for an uptick in new approvals and housing developments over the forecast period.
Additionally, the Budget's £3 billion support package for SMEs and the build-to-rent sector is expected to provide a boost to new and smaller developers, further lifting the overall housing supply.
