UK construction forecast: 11% rebound in 2027

Glenigan’s Winter 2026 UK construction forecast predicts that project starts will fall by 13% in 2026, before rebounding by 11% in 2027 and a further 7% in 2028.

The outlook is weaker than in our Summer UK construction forecast, which predicted a 1% dip this year. The prolonged conflict in the Middle East has pushed up energy prices, inflation and borrowing costs, weighing heavily on investment decisions across the industry. However, the medium-term picture remains positive, with public sector programmes, infrastructure investment and a gradual return of private sector confidence expected to drive a recovery from 2027.

A tougher economic backdrop

The UK economy has weathered the storm better than many expected, but construction has been a weak spot. Rising costs, geopolitical uncertainty and fears over interest rates have deterred investment, and Glenigan has recorded a sharp drop in projects starting on site this year.

Household finances are also under renewed pressure. Consumer price inflation rose to 3.3% in August and is expected to peak above 4% early in 2027, while earnings growth has slowed to its weakest rate since 2020. UK economic growth is forecast at around 1.2% in 2027, strengthening to 1.4% in 2028 as energy prices and inflation ease.

Private sector caution

Financial viability remains the key constraint for private developers. Elevated construction costs, tighter lending conditions and softer demand in some markets have led to schemes being redesigned, delayed or cancelled. Developers are increasingly prioritising projects with stronger margins and lower risk.

Private housing has been hit hardest. A sluggish housing market, higher mortgage rates and rising development costs, including building safety requirements, are expected to drive a 24% fall in starts this year. A gradual recovery is forecast from mid-2027, although activity is expected to remain below 2025 levels by the end of 2028.

Industrial starts are forecast to fall by 14% in 2026, as investors defer projects in the face of uncertainty and higher borrowing costs. Offices tell a more positive story: after holding steady this year, starts are forecast to rise by 11% in 2027 and 8% in 2028, supported by demand for high-quality, sustainable space, refurbishment work and new data centres. Hotel and leisure is expected to slip back before returning to growth in 2028.

Public investment and infrastructure lead the recovery

Increased capital funding from the Spending Review has been slower than expected to turn into project starts, with education and health each forecast to edge up by just 1% this year. Stronger growth is expected from 2027 as major schemes, including the School Rebuilding Programme and New Hospital Programme, progress to site. Education starts are forecast to rise by 9% in 2027, and health starts by 11%.

Civil engineering starts are set to fall by 9% in 2026, a second successive annual decline, before recovering by 11% in 2027 and 10% in 2028. Utilities are expected to provide a consistent source of growth, with the AMP8 water cycle, renewable energy generation and electricity network upgrades all underpinning activity throughout the forecast period.

What the UK construction forecast means for your business

For contractors, suppliers and manufacturers, the forecast points to a challenging year ahead but clear opportunities from 2027. Knowing which sectors will recover first, and when, will be key to planning business development, resourcing and sales strategy.

The full Winter 2026 UK construction forecast goes further, with detailed sector-by-sector analysis, the value of project starts by sector to 2028, and the key economic assumptions behind our outlook.

Download your free copy of the Glenigan Construction Industry Forecast 2027–2028

Already a Glenigan customer? Log in to the Glenigan platform to view the full forecast in your Insight pages.

Prepared with AI assistance using Glenigan data and reviewed by Glenigan’s economics team.