Rider Levett Bucknall (RLB) claims that market recovery has been delayed with uncertainty over the Middle East in its latest Construction Market Intelligence report.
The built environment and property management consultant’s report for Q2 tells of a shifting and “increasingly uncertain” market environment, shaped by evolving global and domestic pressures.
Against this backdrop, construction activity has shown mixed signals with a softer start to 2026, with new-build output falling compared to Q4 2025, and new orders declining at a point in the year when an uplift would typically be expected.
However, in more positive news, resilience in refurbishment and maintenance activity, alongside a late increase in monthly output in March, points to a degree of “underlying stability”, albeit at subdued levels of growth.
Input cost forecasts have been revised upward, with the BCIS General Building Cost Index for 2026 increasing to 3.87%, driven by material price volatility and sustained wage growth. While individual material price increases are often running ahead of this trend, in many areas supply chains are absorbing the impact in response to slowing demand.
Labour market indicators are also showing signs of strain, with unemployment forecasts increasing from previous estimates. At the same time, there is a growing likelihood that wage and salary expectations will remain elevated or increase further if inflation persists at higher levels than previously anticipated.
RLB’s Tender Price Index has also been revised upward to 3.98% for 2026, compared to the previous quarter’s forecast for 2026 of 3.45%, reflecting a difficult pricing environment as contractors respond to increased cost risk and uncertainty.
Paul Beeston, partner, head of industry and service insight at RLB, said: “We are seeing increasing divergence in forecasts based on project sector, size and geography. Where pipelines are resilient, input costs are pushing tender prices significantly ahead of our all-in forecast; where pipelines are softening, there is increased absorption of input costs through the supply chain.
“Taken together, the data suggests that the recovery anticipated for 2026 is being pushed further out, with heightened inflation, weaker growth and reduced pipeline momentum creating a more challenging near-term outlook for the UK construction market.”
Comeback kid?
In a further economic analysis, this one released by Glenigan, the company asks if the UK’s commercial construction sector is experiencing a comeback, with suggestions of the non-residential sector on a slow road to recovery.
Despite that, Glenigan’s June 2026 edition of its construction index remains cautious, and perhaps somewhat contradictory of that positive sentiment: the construction sector is “stuck in the doldrums of persistent decline”, according to the index, and is “struggling to overcome the substantial socioeconomic headwinds and unprecedented market uncertainty” that has characterised much of the second quarter of 2026.
Overall, the value of work starting on site in the three months to May dropped 7% and by almost a quarter (-23%) compared to last year.
It shows the landscape remains distinctly “overcast”, with the Middle East conflict still in full swing (with little sign of an immediate resolution) and the UK government distracted from its agenda by political infighting. Residential activity remains “frigid”, reflecting ongoing affordability constraints and reduced investor appetite. There appears to be little immediate appetite amongst buyers to imply that this will change any time soon.
Simultaneously, civils work has weakened considerably, with both infrastructure and utilities contributing to the downturn. With the government plagued by infighting and intrigue, there seems to be limited room for updates on planned capital projects to indicate a short-term uplift.
However, an uptick in non-residential sectors implies that the playing field is becoming slightly less hostile for contractors and subcontractors working within many commercial verticals. Whilst the market remains fragile, these pockets of resilience suggest that a future recovery might not be as far off as it currently seems.
Allan Wilen, Glenigan’s economic director, said: “Construction markets remain subdued, with activity declining amid ongoing economic uncertainty. On the housebuilding front, developers continue to take a cautious stance, reassessing and rescheduling planned project starts in response to weakening demand and tighter financial conditions.
“Whilst strong growth in offices, alongside modest gains in retail, education and health, helped support non-residential starts during the three months to the latest period, this was insufficient to offset continued declines across residential and civil engineering activity.”
Read next: Homes England acquires land for Cambridge East urban expansion
Are you a building professional? Sign up for a FREE MEMBERSHIP to upload news stories, post job vacancies, and connect with colleagues on our secure social feed.
