Construction output is expected to grow by just 1.7 per cent in 2026 amid ongoing geopolitical uncertainty, a trade body has warned.
The forecast is a major downgrade on previously predicted growth of 2.8 per cent, made last autumn, the Construction Products Association (CPA) said.
In a new report, published on Monday (26 January), the CPA said there remained a “vast array of uncertainties and risks in construction that could have a major impact on near-term forecasts for each construction sector and sub-sector”.
Factors such as geopolitical tension, high costs, increased tax and the skills crisis are exacerbating the problems, the body warned.
“Many firms have had to assume that activity in 2026 will be similar to 2025 levels,” the CPA said.
“This points to a rise in insolvencies and job layoffs in firms across the supply chain working in some sectors, such as housing new-build and repair, maintenance and improvement, as well as new large commercial developments, unless there is a rapid improvement in activity.”
In private housing – the largest construction sector – the CPA warned there was “little to suggest a large increase in housebuilding activity this year”.
Housebuilding volumes need a “sharp rise” in demand, but the CPA said this was unlikely without “demand-side stimulus”.
The forecast for the private housing repairs and maintenance sector – construction’s second largest market – was revised down to a contraction of 1 per cent in 2026, marking a second year of decline, the CPA said.
The body added that the £15bn Warm Homes Plan, announced last week, was “unlikely to lead to notable growth in the near-term”.
One bright spot is infrastructure, where output is forecast to rise by 3.9 per cent in 2026, although this is unchanged from a forecast last autumn. The increase is being driven by energy generation and distribution and increased investment in water infrastructure under AMP8, although it is balanced against the fear that the HS2 reset will delay activity.
CPA’s head of construction research Rebecca Larkin said: “We enter 2026 with little to suggest that the conditions that held back construction over the past 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.”
A separate report, also published on Monday by Turner & Townsend (T&T), offered a slightly rosier picture as it said despite weak demand, high interest rates and regulatory constraints “well-funded and viable projects continue to move forward”.
T&T said it was maintaining its estimate for tender price inflation despite the “recent weakening in 2025”.
But it added: “The balance of labour pressure and the possibility that material prices could move needs careful monitoring if the pipeline improves.”
Looking ahead, T&T said “expectations for future activity into 2026 are improving as inflation eases and borrowing conditions gradually stabilise”.
Mace Consult also revealed its latest quarterly market view on UK construction, which highlighted that new orders increased by 9.8 per cent in Q3 2025.
The firm said that with material prices slowly “ticking up”, it had left its tender prices unchanged.
But Oliver North, director of cost and commercial management, UK and Europe at Mace Consult, said: “In light of the ongoing economic backdrop, it seems vital that government-backed projects continue in order to support the sector.”
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James Wilmore