Chancellor Rachel Reeves has been warned she has missed another opportunity to improve construction after releasing her Spring Statement.
Against the backdrop of escalating conflict in Iran, restoring confidence through the Spring Statement was always going to be challenging.
Much of the current uncertainty affecting markets lies beyond domestic policy control, yet uncertainty remains a significant constraint on investment.
The Office for Budget Responsibility’s (OBR) downgrading of GDP growth to 1.1% in 2026 is very unlikely to ease concerns over geopolitical instability among construction’s businesses, clients and funders.
BCIS maintains that weaker growth expectations for 2026 and a looser labour market are more likely to continue tempering demand. Prolonged unrest in the Middle East also raises risks for input construction costs.
For now, the government’s housing and infrastructure commitments remain in place but scope for additional, fiscal support or rapid delivery seems restricted.
CPA Economics Director Noble Francis said: “The Chancellor’s Spring Statement was always expected to be low profile, with little in terms of new policy, especially compared with the Autumn Budget in November. However, the recent, escalating situation in the Middle East provided a very difficult backdrop, overshadowing the fiscal update.
“The situation in the Middle East means that the Office for Budget Responsibility (OBR) inflation forecast and GDP forecasts are already too optimistic. This is clearly concerning, as the OBR revised down UK GDP for 2026 from 1.4% to 1.1%, even before accounting for the Middle Eastern conflict on growth, inflation, and delays to interest rate cuts. As a result, the OBR’s forecasts are highly likely to be revised down again at Autumn Budget 2026.
“One noteworthy point in the Spring Statement was that the OBR forecasts the low point in house building will be next financial year (2026/27), after which it expects house building to rise very sharply. However, despite this, it still forecasts only 1.3 million net additional dwellings in the UK over the 5-year Parliament. The government's 1.5 million target is for England only over 5 years, and the OBR forecast is equivalent to 1.1 million net additional dwellings in England.
“So, the OBR forecasts that the government will miss its house building target by 400,000 homes or 26%. Furthermore, given that the OBR forecasts are overoptimistic due to the recent Middle Eastern conflict, as inflation will be higher and there will be fewer, delayed interest rate cuts than the OBR has forecast, this suggests that the OBR’s house building forecasts will be revised down further at Autumn Budget 2026.”
The Chancellor’s statement was a missed an opportunity to boost construction activity at a time when house building is falling and more builders are leaving the industry, say the Federation of Master Builders (FMB)
Brian Berry, Chief Executive of the FMB said: “While the Chancellor focused on reiterating previous announcements, small builders were left waiting for the practical measures that would unlock growth, boost housebuilding, and drive progress on retrofitting the UK’s homes. The Chancellor’s recognition that more needs to be done to get young people into apprenticeships and employment was welcome, but the industry has heard similar promises before. Without clear policy detail, commitment to funding, and a long‑term plan to support SMEs, warm words do not translate into real jobs or skills.
“This Spring Statement could have set out concrete steps to support small and medium-sized builders to deliver the homes the country desperately needs, accelerate energy‑efficient retrofitting, and introduce a robust licensing system to raise standards across the industry. Instead, it was another chance for real progress that has been allowed to pass by. If the Government is serious about economic growth, improved productivity, and meeting its housing and climate ambitions, it must move quickly from rhetoric to action and put small builders at the heart of its plans.”
The Home Builders Federation (HBF) said the Statement showed the Government was continually missing the opportunity to address both the supply and demand challenges facing the home building sector.
Neil Jefferson, Chief Executive of the HBF said: “Whilst the Government has made encouraging progress on planning policy, ministers need to acknowledge now the worsening viability and affordability constraints on the home building sector. This is quite clearly reflected in today’s OBR projection for home building that shows a huge undershoot on the Government’s 1.5m homes target.
“The Spring Statement is a missed opportunity to address this. Home builders are struggling to meet the ambitious targets of housing delivery alongside the backdrop of worsening viability conditions for housing developments as a result of new taxes, levies and policy costs.
“Alongside this, home builders are also facing demand-side challenges, as potential home buyers are, for the first time, without the support of a government-backed scheme to support first-time buyers' access to the housing market.
“Our suggested equity loan scheme offers a real solution to this issue. A targeted first-time buyer equity loan scheme, part-funded by developers that would restore access to affordable mortgage finance, support new housing delivery, create jobs and growth.”
