Continued uncertainty holds back construction

The Construction Products Association has downgraded its Winter forecasts, expecting overall construction output to rise by just 1.7% in 2026, a significant drop from the 2.8% growth forecast in October.

The slowdown in activity in key sectors has persisted and in the largest sector, private housing, there is little to suggest a large increase in house building activity this year. Private housing output is forecast to grow by only 1.5% in 2026, revised down from a forecast of 4.0% in Autumn.

Private housing rm&i saw subdued activity throughout 2025, despite a sustained period of real income growth, reductions in interest rates and households with accumulated savings. Yet activity will be negatively affected by the ending of the government’s ECO programme of energy-efficiency improvements in March. The forecast for private housing rm&i output has been revised down to a contraction of 1.0% in 2026, a second year of decline.

Infrastructure activity remains strong, driven by energy generation and distribution and increased investment in water infrastructure. Overall, infrastructure output is forecast to rise by 3.9% in 2026, unchanged from the Autumn 2025 forecast publication.

CPA Head of Construction Research, Rebecca Larkin said: “We enter 2026 with little to suggest that the conditions that held back construction over the last 12 months are improving: slow economic growth, weak business and consumer confidence and risk aversion resulting in subdued activity in the major sectors of construction. With hopes of a recovery consistently dashed last year, firms in the construction supply chain are bracing themselves for another difficult year that is still laced with risks, challenges and uncertainty. However, there are two main primary questions remaining. Firstly, when will confidence improve enough to see homebuyers, homeowners and investors press ahead with large spending decisions and drive a pickup in house building, home improvements and large private sector projects. Secondly, will government introduce a much-needed policy to enable demand in a housing market and house building sector given that affordability remains a key constraint? Until then, the 1.7% growth that is forecast for construction is pinned on niche areas of activity such as commercial fit-out and refurbishment, infrastructure work on energy and water networks, as well as the effective delivery of public sector building programmes for schools, hospitals and prisons.”