UK construction poised for growth from 2025
The UK construction sector is expected to see a recovery from 2025, with project starts forecast to grow steadily, according to industry analysts Glenigan.
Its latest report, Construction Industry Forecast for 2025-2026, predicts an 8% rise in underlying starts — projects under £100 million in value — for 2025, increasing to 10% in 2026.
The rebound is attributed to a mix of public investment and renewed private sector confidence. Glenigan’s economics director, Allan Wilén, explains: “Strengthening household incomes from 2025 will support consumer-facing sectors like private housing, retail, and hotel and leisure. Improved economic conditions and easing borrowing costs are also set to boost commercial property markets.”
Housing to lead growth
The housing sector is set to drive the recovery, with double-digit growth predicted in both private and social housing starts over the next two years. Private housing, after two challenging years, is forecast to grow by 13% in 2025 and 15% in 2026. “Improved household incomes and a brighter economic outlook have bolstered housebuyers’ confidence,” says Wilén.
Key projects include the first phase of Berkeley’s Lombard Square development in south London, set to deliver 328 homes. Social housing is also expected to rise by 11% annually, supported by a £500 million increase in the Affordable Homes Programme for 2025/26.
Office construction to rebound
Office developments are forecast to experience the sharpest sectoral growth, with an 18% increase in 2025 following a 21% drop this year. Wilén highlights a shift in demand due to hybrid working, which is driving new builds and refurbishments. Approved schemes include Manchester’s £92.4 million Mayfield Quarter development and M&G’s £80 million project in south London.
Public sector and civil engineering
Public investment will play a significant role, particularly in civil engineering and health projects. Utilities work, supported by Net Zero targets and water industry capital expenditure, is expected to underpin civil engineering growth, with significant projects such as the £1.3 billion HS2 Euston rail tunnel progressing.
Health construction is set for a 10% boost in 2026, supported by increased NHS funding for infrastructure improvements. Upcoming projects include the £64 million North Denbighshire Community Hospital and the £95 million refurbishment of Roseberry Park Hospital.
Economic Outlook
While sectors like education may see limited growth, the overall outlook for construction is positive. Glenigan forecasts a sector-wide recovery, with project starts increasing by 10% in 2026, marking a turning point after several challenging years.
“The road to recovery is opening up,” Wilén says, “with a combination of public and private investment setting the stage for better times ahead.”
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