The value of underlying construction starting on-site in the three months to the end of June 2026 fell 15% against the preceding quarter and was down 38% on the same period last year, according to Glenigan’s July 2026 Construction Index.
Residential starts fell 31% quarter-on-quarter and 52% year-on-year. Private housing drove the decline, with starts down 40% against the preceding three months and 63% lower than a year earlier.
Glenigan attributed this to sustained high interest rates denting buyer demand, alongside rising labour and material costs deterring developers from committing to new sites. Social housing starts fell 11% quarter-on-quarter and 18% year-on-year, which Glenigan linked to rising material costs and delayed projects.
Non-residential starts rose 3% against the preceding quarter but remained 17% below last year’s level. Office construction was the strongest-performing vertical, up 51% quarter-on-quarter and 8% year-on-year, supported by the £99m West One development in London.
Education starts rose 17% quarter-on-quarter and 7% year-on-year, with the £49.7m Mercia and Newhall Schools development in Derbyshire cited as a contributor; Glenigan noted further activity is expected as the Schools Rebuilding Programme continues. Health starts rose 2% quarter-on-quarter, supported by the New Hospitals Programme, though starts remained 28% below last year’s level.
Industrial, hotel & leisure, and retail starts all declined. Industrial fell 15% quarter-on-quarter and 29% year-on-year; hotel & leisure fell 14% quarter-on-quarter and 42% year-on-year; retail fell 27% quarter-on-quarter and 9% year-on-year.
Civil engineering starts fell 19% against the preceding quarter and 45% year-on-year, driven by a 28% quarterly fall in infrastructure starts – down 51% year-on-year – and a 7% quarterly fall in utilities starts, down 36% year-on-year.
Regionally, the West Midlands recorded the strongest quarterly performance, up 59%, though starts remained 14% below last year’s level. The South West rose 10% quarter-on-quarter but was down 55% year-on-year. Northern Ireland fell 18% quarter-on-quarter but was up 8% year-on-year. London fell 15% quarter-on-quarter and 22% year-on-year. Scotland fell 28% quarter-on-quarter and 49% year-on-year, while Yorkshire fell 8% quarter-on-quarter and 45% year-on-year.
Allan Wilen, Glenigan’s economic director, said: “In another perfect storm for the UK construction sector, a sharp decline in residential projects led the sector decline during the second quarter. This drop reflects the impact of the Iran War on consumer confidence, with developers adjusting their development programmes in response to a slowing housing market.
“Non-residential construction is more stable, with an upturn in office, health and education projects offsetting weakness in other sectors. However, the impending change of prime minister will add to uncertainty near term and could disrupt the roll-out of departmental investment programmes.”
Image credit: Khakimullin Aleksandr/Shutterstock
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