UK construction on the rise with a strong three-year rebound forecast

A renewed sense of optimism is spreading across the UK construction industry, with Glenigan’s latest UK construction forecast predicting a 24% surge in project starts by 2027.

Drawing on extensive construction data and market intelligence, our report offers a detailed look at what’s ahead for the sector and signals a much-needed turnaround after a challenging 2024.

After a flat 2024, 2025 started slowly. But with political stability returning and markets settling, momentum has started to build. The Government’s latest Spending Review is already boosting public sector activity, and Glenigan data shows early signs of recovery in construction starts.

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 industrial construction sector is one of the stronger performers, projected to resume growth from 2025, primarily driven by increasing demand for logistics space as rising consumer spending boosts requirements from online retailers and third-party carriers.

Meanwhile, retail construction faces a more gradual recovery path, with near-term challenges from National Insurance increases and minimum wage rises creating cost pressures for retailers. While an excess of vacant retail premises will likely constrain new developments, opportunities exist in repurposing existing spaces into mixed-use locations, with discount supermarkets Aldi and Lidl remaining notable expansion bright spots.

Hotel and leisure construction, which rebounded in 2024, faces similar labour cost challenges to retail. However, improving household finances are expected to increase discretionary consumer spending, strengthening investor confidence and driving sector growth through 2026-2027.

The office sector is forecast to return to growth as financing conditions improve. This follows a 16% decline in starts last year, amid higher borrowing costs and surplus floorspace. This has been prompted by increasing office refurbishment work, as premises are remodelled for hybrid working. Likewise, environmental performance requirements will generate demand for retrofit and new build projects throughout the forecast period.

Despite some ongoing challenges, many commercial sectors are regaining ground as investment and consumer spending increase.

Renewed growth across key areas:

Education

Education construction has demonstrated particular strength, with school building projects surging 41% in 2023 and continuing to grow through 2024, bolstered by increased Department of Education capital funding and RAAC remediation programmes. The current financial year anticipates 100 new school rebuilding projects alongside additional further education investments, though university construction faces constraints from financial pressures.

Healthcare

Healthcare construction has recovered from 2023 disruptions, with increased NHS capital funding for 2025/26 targeting RAAC issues and estate repair backlogs alongside technology investments.

Social housing & infrastructure

Social housing development has benefited from greater cost stability and increased government funding, with further growth anticipated from mid-2025.

On the civils front, a raft of infrastructure projects are forecast for sustained growth over the next three years, supported by increased funding for road repairs and longer-term investment in transportation networks. The utilities sector shows particular promise, with water industry investment nearly doubling to £104 billion over five years for pollution reduction and infrastructure improvements, while renewable energy and grid enhancement projects advance under net-zero policies.

Water sector investment is expected to reach £104 billion over five years

“The industry has faced a series of frustrating years, but we’re finally turning a corner. Consumer confidence is returning, the Government is investing strategically, and conditions are right for a rebound, said Allan Wilen, Economic Director, Glenigan.

While Glenigan acknowledges risks from global economic shifts, the outlook is positive. With policy, investment and consumer trends aligning, the next three years look significantly brighter for the construction sector.

Read the full forecast report