The UK construction industry is preparing for a gradual recovery over the next two years, following a challenging period, particularly in the private housing sector. After facing significant hurdles, the outlook is starting to brighten, offering hope for industry stakeholders and potential homebuyers alike.
According to the latest forecasts from the Construction Products Association (CPA), total construction output is expected to grow by 2.1% in 2025 and 4.0% in 2026. However, this year’s recovery forecast has been slightly revised down from the 2.5% growth anticipated in the autumn, primarily due to slower economic growth, persistent inflation, and fewer expected interest rate cuts. These factors contribute to cautious optimism as the industry navigates these complex challenges.
In the private housing market, the rise in mortgage interest rates at the end of 2024 suggests that recovery and demand for new builds will be slow and uneven in the first half of 2025. Nevertheless, the forecast for private new build housing output remains positive, with an anticipated increase of 6.0% in 2025 and 8.0% in 2026. The outlook for private housing repair, maintenance, and improvement (RM & I) is also encouraging, with expected growth of 3. 0% in 2025 and an additional 4. 0% in 2026.
Infrastructure output is projected to rise as well, with an increase of 1.4% in 2025 and 4.1% in 2026. Rebecca Larkin, CPA Head of Construction Research, highlighted the significance of these forecasts, stating, “After a difficult couple of years, it is a welcome return to growth forecast for the construction industry in 2025 and 2026, although the recovery is set to be more gradual than in our forecasts before the autumn budget.” She emphasised that persistent inflation means interest rates are unlikely to decrease as much as previously expected, adding an element of uncertainty for potential homebuyers and existing homeowners regarding their major spending decisions.
As we look ahead, the recovery is anticipated to gain momentum in the second half of the year, paving the way for a more robust construction landscape in the UK. The gradual recovery offers a chance for the industry to stabilise and grow, providing opportunities for innovation and development in the years to come.
