- Quarterly Market View analysis finds that government’s budget does little to support privately-led development, who will face greater public-sector client competition.
- Analysis finds that a promising pipeline is not converting into actual workload.
- New forecast reduces price inflation for 2026 and 2027, with private-sector programmes seeing less price pressure due to weak demand.
- Experts identify key government actions to accelerate construction in 2026.
Arcadis, the leading global design and consultancy organization for natural and built assets, today announced the release of its latest UK Market View report for Winter 2025, titled ‘Last Roll of the Dice’. This report, compiled with input from Arcadis market and sector experts, provides a comprehensive analysis of current market conditions, sector-specific trends, and inflation forecasts across the UK construction industry, inclusive of new analysis in the aftermath of the Autumn Budget. Analysis indicates that construction is splitting into a multi-speed market, and for consultants and contractors without a route to public sector work in 2026 and 2027, bid strategy could become more risk-seeking: the last roll of the dice.
The UK construction market is closing 2025 on an uncertain note, as a promising project pipeline has failed to translate into consistent workload across the supply chain. The government’s budget contained little support for non-public development, with the minor exception of supporting apprenticeships. With business rates increasing from April 2026 onwards and with returns on capital investment forecast to fall to 11% per annum over the next several years, this budget added few incentives to invest.
Despite strong new construction orders in Q3, critical sectors including housing and infrastructure continue to lag, leaving many contractors and consultants concerned about future prospects. Construction material prices have remained stable and labour pressures are currently balanced, however the sector faces long-term risks of labour scarcity . However, due to subdued demand in the short term, Arcadis is forecasting price inflation for 2026 and 2027 to now be lower than previously expected.
Arcadis finds that the industry is experiencing a multi-speed market dynamic: high-performing contractors in infrastructure and public sector work remain relatively insulated, while others—particularly those focused on residential and commercial projects—face increasing competition and shrinking margins. Persistent challenges, including affordability, viability, and ongoing delays in planning and approvals, have stalled momentum despite the UK economy largely tracking expected growth. This dynamic is producing unsustainable levels of pressure on the private-sector market, who are seeing more and more bids as ‘must-wins’, jeopardising their stability and harming the market overall.
As the market looks ahead to the new year, the report highlights the urgent need for policy clarity, faster project approvals, and measures to unlock affordability barriers—particularly in housing. Analysis indicates the following measures could reduce construction market risks and accelerate growth:
- Interest rate stabilisation: Improved fiscal discipline could see an easing in the cost of borrowing.
- Reducing regulatory barriers: Considerable progress has been made, from speeding up planning decisions to reducing the backlog of approvals for high-risk buildings. In a more expensive financial market, this can and must go further.
- Public programmes support: 2026 will see the start of the four-year programme under the Comprehensive Spending Review (CSR). It is imperative that departments already busy with work are able to deliver the promised new projects.
- Network infrastructure delivery: The market needs to see confidence that existing programmes are deliverable and that they will produce a return.
- Power connection queues: These need to be rationalised quickly to enable mega-projects to proceed with certainty.
Simon Rawlinson, Head of Strategic Research and Insight, Arcadis said, “Despite signs of resilience in certain segments of the construction market, the persistent issues of affordability, slow project conversions, and a lack of demand in key sectors continue to weigh heavily on the industry. The recent budget did little to address these fundamental challenges or stimulate much-needed additional investment. Without decisive action to tackle bottlenecks and unlock stalled opportunities, 2026 risks becoming another year of missed potential for UK construction. This will have dire consequences for the construction market, especially in the privately-led development, which sits at the heart of the government’s growth agenda.”
