The UK construction industry is struggling to cushion the blows from international conflict and a persistently weak economy, with new project starts showing sharp declines, says Glenigan.
In the April edition of its Construction Index, focusing on the three months to the end of March 2026, the company highlights the serious challenges the sector faces – referring to them as “relentless”.
As Glenigan notes: “The industry remains in the tight grip of decline which, if not terminal, is having a deeply damaging effect, pushing its resilience to a breaking point. A phenomenal series of socioeconomic events and foreign policy decisions have resulted in a severely disrupted supply chain and unprecedented market volatility.”
The US-Israel/Iran War started at the end of February shows no sign of coming to an end any time soon, despite a ceasefire deal that seems – at time of writing – as unlikely to hold. Inevitably, this is breeding uncertainty that is set to keep sector performance “subdued”.
Whilst some of the negative effects are being felt in the here and now, the expected aftershock of the continued closure of the Strait of Hormuz, alongside the increasing threats posed to the Suez Canal and Red Sea, mean disruption is predicted to continue through Q2 and Q3 2026.
Amid this maelstrom, new projects commencing in the coming months are expected to be impacted, Glenigan says. This comes after work starting on site fell once again, particularly when seasonally adjusted, dropping by 17% compared to Q4 to finish almost a fifth (-18%) below 2025 levels.
Residential construction “tumbled” yet again, as international conflict, persisting confusion around planning policy, and a weak economy continue to hinder development. Ice-cold investors and apprehensive potential buyers are keeping their hands firmly in their pockets for the time being.
For Non-Residential, Offices remained a strong outlier, posting “impressive” project-start increases compared to both the previous quarter and last year. However, these impressive figures were not nearly enough to outweigh overall disappointment in these verticals, with civils tanking against both periods covered by the Index.
Glenigan’s Allan Wilen said: “Superficially, looks can be deceiving. A seasonal rise during the first quarter is masking a renewed weakening in project starts. All three main verticals: housing, non-residential buildings and civil engineering are considerably lower than a year ago and on the previous quarter on a seasonally adjusted basis.
“The sector is fighting on all fronts, home and abroad. Particularly, the Iran War will depress activity further near-term as private developers and house purchasers delay investment decisions due to fears of higher than anticipated interest rates, rising material costs, spiralling energy costs and stalled economic growth. It will have a knock-on effect on the non-residential verticals which, although many have ring-fenced funding, will no doubt be putting activity on hold to ensure they don’t waste budgets whilst rates spike.”
Image credit: Savvapanf Photo/Shutterstock
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