UK construction output forecasts highlight prolonged uncertainty, revised growth expectations, and implications for digital construction stakeholders.
The Construction Products Association (CPA) Winter Forecasts, published at the end of January, reveal a notable downgrade in expectations for UK construction output growth. Overall construction output is now forecast to increase by 1.7% in 2026, down from the 2.8% growth projected in October. This revision reflects persistent weakness across several major construction sectors and reinforces concerns about the pace of recovery.
Firms operating throughout the construction supply chain report that subdued activity in key markets has continued since Spring. Weak economic fundamentals, combined with geopolitical uncertainty, are encouraging risk-averse behaviour among investors, developers, and clients. As a result, decision-making timelines are extending, delaying projects and constraining near-term output growth across private housing, housing repairs, maintenance and improvement (rm&i), and commercial construction.
Private housing output faces structural constraints
Private housing remains the UK’s largest construction sector, yet prospects for a significant uplift in activity remain limited. According to the CPA, there is little evidence to suggest a substantial increase in housebuilding volumes during 2026. Developers face an increasingly difficult balance between buyer affordability and development viability.
In locations where demand remains stable and homes are affordable, site viability has been eroded by rising costs, including additional regulatory and policy-related burdens. These pressures are particularly acute for small and medium-sized house builders. Conversely, in areas where higher house prices support viability, affordability and buyer demand continue to act as constraints.
Without demand-side stimulus, a marked increase in housebuilding appears unlikely. Consequently, private housing output growth for 2026 has been revised down to 1.5%, a sharp reduction from the 4.0% forecast in the Autumn.
Decline continues in private housing rm&i
Private housing rm&i is the second-largest construction sector and experienced subdued activity throughout 2025. This underperformance persisted despite real income growth, interest rate reductions, and households holding accumulated savings. The CPA notes that confidence, rather than capability to spend, remains the primary barrier.
The outlook is further weakened by policy changes. The government’s Autumn Budget confirmed that the Energy Company Obligation (ECO) programme will conclude in March 2026. While the Warm Homes Plan outlines longer-term ambitions, it is not expected to generate material growth in the short term.
As a result, private housing rm&i output is now forecast to contract by 1.0% in 2026, marking a second consecutive year of decline and adding pressure across specialist trades and digital retrofit supply chains.
Infrastructure investment provides relative stability
Infrastructure remains a comparatively strong area within the UK construction market. Activity continues to be supported by investment in energy generation, energy networks, and water infrastructure under the AMP8 regulatory period. These projects are providing a degree of resilience for contractors and digital construction delivery models focused on large-scale asset management.
However, this strength is partially offset by several factors. Work at Hinkley Point C is moving beyond its peak phase, while uncertainty surrounding the HS2 ‘reset’ raises concerns about delays to near-term rail activity. In addition, reduced nominal funding and limited clarity on the forthcoming Road Investment Strategy (RIS3) are contributing to a gap in the roads pipeline.
Despite these challenges, infrastructure output is forecast to grow by 3.9% in 2026, unchanged from the Autumn 2025 forecast.
Industry perspective on construction uncertainty
Commenting on the Winter Forecasts, CPA Head of Construction Research Rebecca Larkin highlighted the persistence of challenging conditions. She said: “We enter 2026 with little to suggest that the conditions that held back construction over the last 12 months are improving: slow economic growth, weak business and consumer confidence and risk aversion resulting in subdued activity in the major sectors of construction.”
Larkin emphasised the cumulative impact of repeated delays to recovery expectations, adding: “With hopes of a recovery consistently dashed last year, firms in the construction supply chain are bracing themselves for another difficult year that is still laced with risks, challenges and uncertainty.”
She identified two critical questions shaping the outlook. The first concerns when confidence will improve sufficiently for homebuyers, homeowners, and investors to proceed with major spending decisions. The second centres on whether government will introduce policy measures to stimulate housing demand, given that affordability remains a fundamental constraint.
Until these issues are addressed, the CPA notes that forecast growth will depend on specific areas such as commercial fit-out and refurbishment, infrastructure investment in energy and water, and the effective delivery of public sector programmes for schools, hospitals, and prisons.
Digital construction professionals must navigate constrained growth conditions, sector-specific risks, and policy uncertainty, while aligning capabilities with infrastructure, refurbishment, and public sector programmes driving limited UK construction output growth.
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