Brighter times lie ahead for the UK construction industry as the economic recovery gathers pace and private sector investment picks up following the General Election, according to the new mid-year Glenigan Construction forecast.
Assuming a Labour majority is returned on July 4th and interest rates fall over the summer, the forecast predicts that new project starts in the private housing, offices, hotel & leisure, retail and industrial sectors will all increase from next year as investor confidence returns and political uncertainty fades.
In the public sector, activity is likely to be held back in the short term ahead of a new government’s Spending Review. But civil engineering activity is set to continue growing beyond this year helped by more investment by water utilities and on renewable energy projects.
After a 3% increase in the value of underlying (under £100 million) project starts this year, the new Glenigan Construction Forecast sees continuing rises of 7% next year and a further 6% in 2026.
Having staged a tentative recovery this year, private housebuilding stands out as the most promising sector for new construction activity in coming years. Following a 2% rise in project starts in the sector this year, Glenigan is now forecasting a 14% upturn in 2025 with a further 6% increase in 2026.
The prospect of lower mortgage rates, an upturn in property transactions, and rising consumer confidence all bode well for new housing demand. Meanwhile, a new Labour government’s plans to boost activity in the sector by planning system reforms and re-introducing mandatory housing targets for local authorities should prove helpful for housebuilders.
As things stand, the South East continues to see the largest share of planning approvals for new private housing developments of any region, worth over £7.5 billion last year. But recent Glenigan data pointing to an upturn in planning approvals this year for housing schemes in the East of England, the North West and the South West suggests other regions are well-placed to see increases in new starts.
Glenigan data gives numerous examples of private housing developments of all sizes getting underway across the country, including imaginative urban redevelopments which may find favour under a future Labour government.
In Richmond upon Thames, for example, developer Avanton has recently been granted detailed plans for a £250 million Build to Rent scheme across a 1.8 ha site involving 453 flats and commercial units (pictured). Work on the project is set to start early next year and run for 20 months (Project ID: 19076412).
Premium office space in demand
New office project starts are set to grow thanks to buoyant demand for premium, energy-efficient space and more refurbishment work as firms adapt their accommodation to hybrid working. New energy efficiency regulations will also create more refurbishment and retrofit construction work in the sector.
After an 8% increase in new office project starts this year, the new Glenigan Construction Forecast predicts a 12% rise in 2025 and a further 4% increase in the following year. And whilst the overall need for office space is falling, the demand for prime space remains healthy across the country. To meet this, Glenigan data highlights a strong pipeline of approved office projects which is ready for construction, particularly in London but also in the South East and Yorkshire & the Humber.
The Glenigan Forecast also chimes with the recent summer Deloitte London office crane survey. This recorded new start volumes exceeding 4 million sq ft; the first time in the six-monthly survey’s history that this has been seen over three editions in a row. The latest survey also points to a “meaningful market shift towards refurbishment” with refurb work starting on 2.8 million sq ft of London office space in the first quarter.
One major office scheme which is set to get underway in the capital later this year is 75 London Wall Refurbishment (pictured), a £250 million project involving the alteration and extension of a City building for use as offices, flexible commercial space and a cultural forum. Detailed plans have been granted and Multiplex Construction Europe is the main contractor on the scheme which is set to run for 37 months (Project 23099305).
Accommodating hotel growth
Sunnier times also lie ahead for firms working in the hotel and leisure sector. Encouraged by a recovery in the hospitality sector and the prospect of stronger consumer spending and more overseas tourists, developers are pressing ahead with more new construction schemes.
A healthy work pipeline led by an upturn in planning approvals last year – particularly for hotel schemes – has brought a predicted 14% rise in underlying hotel & leisure project starts this year. The new Glenigan Forecast envisages a further 6% rise in hotel & leisure project starts in 2025 followed by an additional 7% rise in 2026.
London accounts for the lion’s share of new activity in the sector. The value of hotel & leisure planning approvals in the capital is on course to reach £1600 million this year, up from £1,000 last year. But approvals for projects in the sector in the South East are also set to rise sharply, to over £1,100 million this year.
One significant project in the sector where work is getting underway this summer is the £155 million YTL Arena Bristol Brabazon development in the former Concorde airfield hangars outside the city (pictured). The scheme includes a multi-entertainment and leisure venue with a 17,000-capacity arena in the airfield’s central hangar whilst a festival hall with leisure, retail, workplace and hotel space will be created in two other hangars. Site preparations on the scheme have started and work is set to run for 30 months (Project ID: 19075925).
Industrial logic for more space
Stronger demand for warehouse and logistics space is set to usher in a return to growth in new industrial construction from next year. After two years of decline, the new Glenigan Forecast predicts that overall industrial project starts are set to rise by 3% in 2025 and a further 4% in 2026.
As consumer spending rebounds with lower interest rates and online retail sales recover their momentum, the demand for logistics space from retailers and third-party carriers is set to grow. Glenigan is forecasting that project starts for warehousing and logistics schemes will grow by 9% pa in both 2025 and 2026.
On current trends, the pattern of industrial planning approvals highlighted in the Forecast points to a strengthening in the pipeline of work in the sector in the West Midlands but also in London and the South East.
Major industrial projects in the pipeline include Spark Walsall One (pictured), a £110 million development by Henry Boot involving over 43,000 sq m of storage, distribution, industrial and manufacturing space across three large warehouse units in the West Midlands town. Work on the scheme is set to start later this year and run for seven months (Project ID: 23375792).
Retail revival
A revival in new developments for the major supermarket chains should mean the gradual recovery in new construction for the retail sector gathers pace in coming years. As cost-conscious consumers turn increasingly to discount grocery chains, the prospect of new store openings at Lidl and expansion at Aldi should boost the work pipeline in the sector.
After a 5% increase in retail project starts this year, the new Glenigan Forecast assumes that starts in the sector will rise by 3% next year with growth picking up markedly by 19% in 2026.
Retail construction also stands to benefit as developers look to repurpose empty shops and transform older shopping centres through mixed-used schemes involving residential, office and leisure space. Based on the value of underlying planning approvals in the opening months of this year, Glenigan data shows that the pipeline for new retail projects is showing good growth in London, the North East and Scotland.
One major regional retail-led regeneration project where plans are due to be submitted this year is the £67 million Smithfield Riverside Redevelopment in Shrewsbury (pictured). It involves the demolition and redevelopment of the Pride Hill Shopping Centre and a car park with a new 4,460 sq m leisure-led scheme with a cinema and food & beverage space as part of a wider town centre redevelopment. Demolition work has begun ahead of construction starting on the scheme which is set to run for 36 months (Project ID: 11205228).
Taps to open on water investment
The prospect of more investment by utilities – particularly water companies– should sustain the recent growth seen in civil engineering activity over the coming years. In the first four months of this year, utilities project starts were up by 13% on the period a year earlier.
More investment in renewable energy and distribution and work on landmark infrastructure projects such as the Silvertown Tunnel and HS2 Phase 1, should also buoy up activity in the civils sector.
Coming after a 12% rise in civil engineering project starts this year, the new Glenigan Construction Forecast predicts starts in the sector will rise by 6% next year and by an extra 4% in 2026.
New civil engineering work in the water sector, where the companies plan to double capital investment to £96 billion over the 2025-2030 AMP 8 period, stands to benefit from major projects such as new reservoirs and schemes to improve river quality.
Glenigan data highlights the scale of some of the projects which are being planned by the water utilities. Anglian Water, for example, has submitted plans for a £277 million relocation of its Cambridge Waste Water Treatment plant to facilitate a new district on a brownfield site north east of the city. Work on the scheme, involving a new treatment centre, tunnels and pumping stations, is set to start in the summer of next year and run for 24 months (Project ID: 20287986).
Elsewhere, public consultations have recently opened on Thames Water’s plans for a new £400 million reservoir at Abingdon in Oxfordshire to boost the water supply around the capital. Work on the scheme, involving a 150 million cubic metre facility, could start in 2028 (Project ID: 93116493).
The drive for Net Zero and Labour’s plans for a new public clean power company should also boost civil engineering work through more investment in renewables. Similarly, National Grid’s £24.8 billion investment program in the transmission network to add new capacity will help keep civils contractors busy.
New public sector investment in construction may be held back under a new government ahead of its first Spending Review. The Glenigan Construction Forecast assumes that the value of new project starts in health, education, social housing and community & amenity work will all dip next year.
But the Forecast predicts that activity in all these sectors will grow in 2026. One priority for a new government is likely to be a boost to NHS capital spending which should reinforce a 4% rise in health sector project starts predicted for 2026.
Meanwhile, construction activity on new schemes in education, where project starts are forecast to rebound by 6% in 2026, should benefit from growth in new school projects.
