1. Modest Growth, but an Uneven Landscape

UK construction output is forecast to grow by around 3–4% in 2026, following a slower 2025. However, this growth won’t be evenly spread.

Private housing (particularly new-build), housing repair, maintenance and improvement (RM&I), and infrastructure are expected to lead the way. Public non-residential and industrial sectors should see improvement, though at a more cautious pace.

What this means:
Targeting the right sectors will be crucial. Businesses aligned with growth areas will outperform those overexposed to slower-moving markets.

2. Sustainability and Net Zero at the Core of Decision-Making

Sustainability is no longer optional. Regulatory pressure, investor expectations, and client demand are pushing construction toward higher environmental standards.

Low-carbon and sustainable materials—such as engineered timber, recycled steel, and alternative concretes—are increasingly common. At the same time, retrofitting existing buildings is accelerating, offering carbon reduction without the environmental impact of full redevelopment.

What this means:
Sustainability now influences design, procurement, and workforce skills. Firms that adapt early will gain a competitive advantage.

3. Off-Site Construction and Modern Methods on the Rise

Modern Methods of Construction (MMC), modular builds, and off-site manufacturing continue to grow in popularity. These approaches help reduce build times, control quality, cut waste, and ease on-site labour pressures.

They also provide greater resilience against weather disruption and supply chain instability.

What this means:
Expect increasing demand for workers skilled in MMC, prefabrication, and factory-based construction environments.

4. Digital Transformation Accelerates

Digital tools are becoming embedded across the industry. BIM is now widely expected as standard, with digital twins increasingly used for planning, asset management, and predictive maintenance.

AI and data analytics are being applied to cost forecasting, safety risk identification, design optimisation, and supply chain management. Technologies such as drones, VR, and AR are also moving into the mainstream.

What this means:
Digital capability is no longer a differentiator—it’s a requirement. Skills gaps in this area will continue to widen.

5. Labour and Skills Shortages Remain a Key Challenge

Workforce shortages continue to impact delivery. With many experienced professionals nearing retirement and apprenticeship uptake lagging behind demand, the pressure is unlikely to ease soon.

Upskilling and reskilling—particularly in digital systems, sustainability, and MMC—will be critical. Employers offering flexibility, strong wellbeing practices, and clear progression paths will be better positioned to attract talent.

6. Rising Costs and Regulatory Complexity

Material and labour costs are forecast to increase further, with ongoing inflation, supply chain disruption, and higher financing costs squeezing margins.

At the same time, regulatory compliance around building safety, energy performance, environmental impact, and planning continues to grow more complex.

What this means:
Careful planning, early procurement, and realistic time and cost contingencies are essential.

7. Infrastructure and Data Centres Gain Momentum

Investment in infrastructure—transport, utilities, and energy—remains strong, alongside rapid growth in digital infrastructure such as data centres.

While these projects often have high entry barriers, they offer long-term stability for businesses able to meet technical, regulatory, and environmental requirements.