More than half of construction businesses (57%) are using artificial intelligence technologies more than they were a year ago, according to the latest State of Trade Survey from the Federation of Master Builders (FMB) and the Chartered Institute of Building (CIOB).
However, 22% of respondents said they are not using AI at all, highlighting a growing digital divide across the sector.
Among businesses already using AI, 80% are deploying it for administration and office tasks, while 42% use it to prepare quotes, estimates and tenders. A third (33%) use AI in site operations, health and safety and quality management - evidence that firms are turning to technology to improve efficiency and ease pressure on stretched teams, rather than replace skilled construction roles.
The shift comes against a tougher trading backdrop. In the first half of 2026, the net balances for workloads and employment both fell, while enquiries dropped. Skills shortages affected 68% of businesses, with 47% reporting delayed jobs, and three-quarters (75%) said material costs had increased. One in five businesses (20%) also reported project delays linked to extreme weather, including heatwaves and rainfall.
Brian Berry, Chief Executive of the FMB, commented: “These figures show that AI is becoming a more established part of how construction firms run their businesses, particularly for administration, tender preparation and project management. But technology is not a silver bullet: more firms reported falls than increases in workloads, enquiries and employment, while rising costs and shortages of skilled tradespeople continue to delay jobs and hold back growth. The Government must ensure small firms have the practical support they need to navigate new technology and grow their businesses in the face of wider challenges.”
Dr Victoria Hills, Chief Executive of the CIOB, said: “The construction sector continues to be an industry where many SMEs have to fight to survive and this has to change. The latest state of trade report confirms what we hear from our members daily, in that skills shortages continue to present major challenges. Government announcements on interventions like V-levels, vocational GCSEs and more apprenticeships are welcome but we urgently need more detail on what those will look like. This must include how the education sector will be supported to deliver them, and the construction sector, especially SMEs will be supported to play its role in providing work placements and teaching expertise.
“Emerging issues like extreme weather extending project timelines is also a big concern. Climate resilience is a matter that desperately needs to be higher up on the industry’s agenda, particularly in light of the prolonged hot weather we experienced this summer, the impact of which will be covered in the next Sate of Trade report.”
The key stats:
Headline indicators: Net balances were -4% for workloads, -10% for enquiries and -4% for employment in the first half of 2026.
UK nations: Scotland recorded the strongest net workload balance at +31%, followed by Wales at +14%; England recorded -9%.
Sector activity: Around three in ten house-building and RMI businesses reported increased workloads. Enquiries rose for 28% of RMI businesses and 21% of house builders.
Recruitment: Among recruiters, 45% struggled to find staff with knowledge of modern sustainable building practices and 37% struggled to recruit people with knowledge of the building safety regime.
Skills shortages: 68% of businesses were affected; 47% reported delayed jobs, 29% restricted recruitment, 21% cancelled jobs and 18% were prevented from growing or expanding.
Costs: Businesses reported increases in materials (75%) transport and fuel (66%), energy and utilities (62%), subcontractors (57%), wages (45%) and prices charged (43%).
Impact of rising costs: 48% increased prices and 47% reported lower-than-expected profits or a loss; 29% restricted recruitment, 14% reported an impact on viability and 16% made redundancies or terminated contracts.
Business outlook: 39% were positive about the second half of 2026, 32% neutral and 23% negative, producing a positive net outlook balance of +16%.
AI adoption: 57% reported using AI technologies more than a year earlier, while 22% were not using AI at all.
Extreme weather: 20% reported project or job delays linked to events including heatwaves and rainfall.
