Glenigan | powered by Hubexo, one of the construction industry’s leading insight and intelligence experts, releases its widely anticipated UK Construction Industry Forecast 2025-2027.
Predominantly focused on underlying starts (<£100m in value), unless otherwise stated, it contains a comprehensive overview of the current state of the construction industry.
The key takeaway from the Summer Forecast, which focuses on the three years 2025-2027, is that the sector will experience a much-needed resurgence in activity, as the UK economy continues to improve and public funding for critical infrastructure is set to increase following last week’s Spending Review.
With growth predicted for 2025 (+3%), 2026 (+10%) and 2027 (+11%), these positive figures, spurred on by greater consumer and business confidence, will no doubt be welcomed industry-wide, especially following a disappointingly stagnant second half of 2024.
Despite the promise of renewed growth, 2025 got off to a rocky start, likely experiencing a hangover from a very disappointing 2024, which was rocked by socio-political turmoil at home and abroad.
However, as the Government found its feet over the Spring, and more certainty started to return to the markets, the prospects of renewed growth appeared increasingly likely. The main driver for this upturn has been a strengthening in domestic demand, particularly consumer spending amid heightened unease in global markets.
This is reflected in the recent uptick in underlying construction starts over the previous quarter, which is anticipated to remain stable following the various building and upgrading commitments made by the Chancellor of the Exchequer last week.
Residential: Housing Market Set for Growth
The outlook for housebuilding is extremely positive.
Private housing starts have already shown marked improvement during the first four months of 2025, bolstered by more favourable market conditions. While a brief retrenchment is anticipated in Q2, this is expected to be temporary. Encouragingly, the housing market is forecast to strengthen considerably during the latter half of 2025 and throughout 2026, driven by rising household incomes, reduced mortgage rates and improving economic conditions.
The chief catalyst for growth in this vertical registered at the start of the year, with the stamp duty increases (introduced in April) providing significant momentum to Q1 housing market activity as purchasers expedited completions ahead of the tax rise. The sector's growth trajectory is expected to continue as consumer confidence strengthens in response to increasing real incomes and further interest rate reductions. Additionally, forthcoming planning reforms are projected to release additional development sites, providing further support to sector growth in the later stages of the forecast period.
The Spending Review's longer-term funding commitments are expected to drive renewed growth in 2026-2027. Social housing development has benefited from greater cost stability and increased government funding, with further growth anticipated from mid-2025.
Commenting on the Forecast, Glenigan’s Economic Director, Allan Wilen, says, “It’s been a frustrating few years for the housebuilding sector, just as there seems to be light at the end of the tunnel a new set of headwinds seems to buffer it, leading to prolonged stagnation. Yet recent events indicate we’re finally turning a corner. Consumer spending power and confidence are improving. This has supported an upturn in housing market activity and is expected to help drive private housebuilding over the next three years.
“The promise of some refreshingly strategic spending from the Government will certainly send a positive signal to contractors and subcontractors nationwide with spending earmarked for a number of big and small projects presenting plenty of opportunities.”
He continues, “We should also not underestimate the mercurial nature of geopolitical events. Whilst the US tariffs have caused turmoil across the world, the UK’s relatively lighter treatment may help to renew private investors enthusiasm to put their money in our built environment. Of course, trade negotiations are ongoing and volatile, so construction businesses need to approach predicted growth with an element of caution. However, as it currently stands, the signs are positive and the industry can look forward to an extended period of increased activity.”
