The construction industry is set to return to “sustained growth” in 2027 following a challenging 2026, according to Glenigan.
In its UK Construction Industry Forecast 2027-2028, the insight and intelligence provider for the construction sector, anticipates that 2026 will end on a low note, with the industry seeing an overall decline of 13%. This figure is well below Glenigan’s earlier expectations as persistent socio-economic turmoil, ongoing international conflict and lingering political uncertainty all continue to impact activity.
However, despite this challenging set of circumstances, Glenigan’s Economics Unit predicts an industry-wide uptick in activity in 2027 (+11%) and 2028 (+7%). Whilst these figures are lower than calculated in the summer, sustained growth will likely emerge, supported by a combination of increased public sector spending and a tentatively improving private sector appetite for investment in residential and commercial projects.
Allan Wilen, Glenigan’s Economic Director, commented: “Momentum is picking up, particularly as funds from the Spending Review are released and public projects, utilities upgrades and critical infrastructure investment gradually start to come online. We believe this, combined with impetus in specific private sector niches like offices and data centres, will have a fortifying effect across the rest of the industry. It could potentially spark a chain reaction leading to sustained recovery in the second half of next year, which may be maintained throughout 2028.”
The report stressed that UK construction has experienced an unusually long period of decline, with the war in Ukraine impacting the supply of construction materials, followed by the conflict between the US, Israel and Iran pushing energy prices, inflation and borrowing costs higher. Living costs also rose and the labour market weakened, resulting in momentum and enthusiasm for new projects fading.
Glenigan says that private sector work has been hit hardest, with fluctuating financial viability affecting many schemes. Build costs are high, lending has tightened and demand has softened in some sectors. As a result, numerous projects have been redesigned, delayed or cancelled.
Allan Wilen explained: “Early signs of recovery gave the sector hope, then unforeseen events disrupted it again. Conflict in the Middle East arrived alongside political upheaval at home and, just as the industry adjusts to one challenge, another arrives. If you’d asked anyone in January, I doubt they’d have predicted a new Prime Minister by the summer, with a new Cabinet and new ministers to match. The government is still finding its feet after a ‘steady-as-she-goes’ Budget. The effect of new policies and spending, on top of existing commitments, is yet to be seen.”
Despite these many issues, Glenigan says that the stage is being set for the industry’s resurgence.
The report finds that the recovery will begin in the public sector, supported by the School Rebuilding Programme, the New Hospital Programme and water investment, which will lead to the education, health and civil engineering sectors all growing steadily in 2027 and 2028.
Social housing, which has faced a comparable situation to its private sector counterpart, will see a gradual recovery. Having dipped by 5% in 2026, it is predicted to rally in 2027 (+5%) and 2028 (+5%).
Allan Wilen continued: “As seen many times before, an uptick in public sector starts will likely send a positive signal to the private sector. Alongside an improving economic outlook, this should help thaw currently frosty investors, encouraging them to revive existing schemes or bring new projects online; although many have to make a significant climb from a very low position to get back in the black.”
The report says that private residential has been one of the hardest hit verticals over the past 12 months, with a sluggish market, high mortgage rates and rising development costs all pushing developers to defer opening new sites. As such, the estimated fall this year is significant at -24%; however, a gradual recovery is expected from 2027, supported by improving consumer confidence and a strengthening housing market.
