The UK construction market is expected to remain subdued heading into 2026. While new orders improved in Q3 2025, many core markets—including housing and infrastructure—have not converted opportunity into workload. The report highlights a multi-speed construction sector, with stronger activity in public and regulated markets but continued weakness in private-sector buildings. Overall, the outlook points to slow growth, tighter viability, and greater reliance on public-sector investment to sustain activity over the next year.

The report notes that materials prices were broadly stable throughout 2025, with contractors generally avoiding inflation allowances in bids. Labor cost pressures have also eased in the short term. However, the overall picture for 2025 shows relatively low inflation, not a decline. Looking ahead, subdued demand means inflationary pressure in 2026 and 2027 is expected to increase but at a slower rate than previously forecast.

The Autumn 2025 Budget provides little direct stimulus for the construction sector. With £26 billion in tax increases and limited new capital funding, private-sector development is likely to remain subdued. As a result, public-sector programmes will play a more important role in sustaining demand for UK construction over the coming years.

OBR forecasts suggest weak GDP growth could continue for the rest of the decade, alongside falling returns on capital investment and slow household income growth. This points to reduced private-sector activity and greater reliance on long-term public-sector capital programmes, which are expected to drive much of the construction market through 2030.

AMP8 has been slower to mobilise due to factors such as ongoing CMA appeals, limited business capacity, scope reviews aimed at reducing costs, third-party delays, and tighter scrutiny of project budgets. While water companies say they are preparing for delivery, these issues have held back early progress.

Construction activity is expected to increase from the second half of 2026. Order books have more than doubled over recent quarters, and once CMA decisions are finalised, budgets released, and design work completed, water companies should be able to unlock the full scale of AMP8 investment.

Major programmes include Heathrow’s H8 investment period, Stansted’s 2026 expansion, further asset upgrades at Manchester Airport, and the recently consented expansion proposals for Gatwick and Luton. These programmes will significantly increase aviation-related construction activity and compete for industry capacity from 2027 onward.

Key airport expansions at Gatwick and Luton are facing delays due to judicial review challenges to their Development Consent Orders. These legal processes can take up to 18 months. Combined with inflation-related viability challenges, this means large-scale runway and terminal programmes are unlikely to move ahead before 2028 or 2029.