Glenigan’s Construction Industry Forecast 2025-2026 predicts strong growth in construction project starts
Alongside strengthened economic growth for the UK, the Glenigan Construction Industry Forecast 2025-2026 predicts a growth of 8% for construction in 2025 and 10% in 2026.
Consumer and business confidence will increase for construction
The recovery will come from increased confidence in the industry, with the fact that project starts have stabilised since the general election, and private sector work has risen in the second half of 2024.
Furthermore, development pipelines are stronger on 2023 figures, with a rise of 7% in main contract awards, supporting a renewed rise in industrial and office starts, reflecting a rise in investor confidence.
The report also predicts a rise in housing starts, expecting a 13% rise in 2025 and a 15% rise in 2026.
This is due in part to the recent private housing market activity, which has stabilised and increased in 2024 due to a positive economic outlook and improvement in household income.
This has further brought more reasonable house prices, attracting more buyers and further supporting the recovery of the sector as housebuilders respond to increased confidence and property transactions.
Government planning reforms and funding to create more housing
The Labour government is targeting 1.5m new homes built by the end of their parliament, which undoubtedly is providing added confidence for housebuilders.
Housing approval rates have seen a downward trend for the majority of 2024, but government planning reforms are expected to curtail this, increasing approval rates and housing developments starting construction.
The Labour budget also contains a £3bn support package for SMEs, and the built-to-rent sector should provide a boost to new and smaller developments to increase the overall housing supply.
Greater funding for social housing
Social housing is estimated to see a boost of 11% in both 2025 and 2026 due to greater cost stability and government funding helping housing associations increase development activity.
Still, the sector has seen a slight and likely short-term setback due to a drop in student accommodation projects, a fallback in project starts of around 15%. Student accommodation is still set to grow due to a relaxing interest rate and increased demand.
New government policies are still set to increase activity over the next two years, with £500m in funding going towards the Affordable Homes Programme and a reduction in right-to-buy discounts allowing local authorities to keep full earnings from council house sales and use the money to fund new social housing.
Healthcare projects to see a boost in 2026
In 2024, healthcare project starts jumped by 11%, a huge reversal of the 8% decrease in 2023. Despite this, NHS planning approvals dropped by 17%, dampening the prospect of growth in 2025.
Still, with a large funding boost, the Chancellor announcing a 15% increase in NHS capital funding for building maintenance, and expected long term spending plans, NHS and healthcare project starts are expected to rise modestly in 2025 at 1%, and then jump by 10% in 2026.
Other sectors expected to see an increase include the education sector, with a predicted 5% growth in 2025 and stabilising in 2026, civil works at 5% and 7% over the two years, office spaces at 18% and 4%, and hospitality at 6% and 9%.
The sector is on track for growth
Glenigan’s Economic Director Allan Wilen says, “The construction sector is on track for growth from 2025, fuelled by a combination of improved consumer confidence, increased household spending, and strategic fiscal changes announced in the recent Budget. These factors are set to drive activity in consumer-related verticals such as private housing, retail, and hotel & leisure.
“The Budget’s adjustments to fiscal rules, allowing for higher levels of capital investment, will also unlock significant public sector and infrastructure projects, providing a much-needed boost to government-funded initiatives over the next two years.”
