The Construction Products Association's Autumn forecasts, released today, indicate cautious optimism for the construction industry in the year ahead, following an especially challenging 18 months for the two largest sectors: private housing new build and repair, maintenance, and improvement (RM&I). Overall, total construction output is expected to grow by 2.5% in 2025 and 3.8% in 2026, after a 2.9% decline this year.
In private housing—the largest construction sector—declining interest and mortgage rates are expected to gradually boost demand across the wider housing market, offering better prospects for housebuilders. The new government has signaled a commitment to increasing housebuilding by proposing significant changes to the National Planning Policy Framework, potentially easing one of the major supply constraints, particularly for smaller builders. However, key issues persist, such as a shortage of planning resources at the local authority level, challenges with nutrient and water neutrality, and requirements for Biodiversity Net Gain. Delays also continue in the construction of high-rise housing and some commercial projects due to uncertainty surrounding the Building Safety Act and limited capacity at the Building Safety Regulator. Despite a 9.0% drop in activity this year, private housing output is projected to grow by 8.0% in 2025 and 7.0% in 2026. There is also potential for stronger-than-expected demand if the Chancellor's Autumn Budget includes measures to stimulate the private housing market and significantly boost funding for affordable housing.
The second-largest construction sector, private housing RM&I, is closely tied to consumer sentiment, real wage growth, and the frequency of home moves, which often lead to significant home improvements within 6-9 months of moving into a property. As the housing market recovers, combined with rising consumer confidence and steady wage growth, RM&I activity is expected to pick up from the second quarter of 2025. Additionally, spending on energy-efficiency retrofits and solar photovoltaic installations has increased over the past two years, with this trend expected to continue, while building safety work provides a stable stream of activity. Private housing RM&I output is forecast to rise by 3.0% in 2025 and 4.0% in 2026, following a 4.0% decline in 2024.
The outlook for non-housing construction sectors remains largely unchanged from three months ago. However, as the government remains the largest client in construction—accounting for nearly a quarter of all projects in the £180 billion industry—the Autumn Budget could have a significant impact on much-needed investment in health, education, and infrastructure.
Infrastructure, the third-largest sector, is expected to grow by 1.6% in 2025 and 3.8% in 2026, following a slight decline of 0.4% this year. Activity remains strong in major projects such as Hinkley Point C and HS2, despite concerns over ongoing cost overruns. Long-term frameworks in regulated sectors like rail, energy, and water continue to support stable activity levels. However, outside of these areas, challenges persist. While investment in water infrastructure is set to increase due to high-profile quality issues, it’s unlikely that this will translate into on-the-ground delivery before 2026, and it may not be enough to offset decreasing activity on projects like the Thames Tideway. Energy infrastructure, however, continues to thrive, with a significant ramp-up in wind farm development.
Commenting on the Autumn forecasts, CPA Economics Director Noble Francis said: “The construction sector has faced a very tough period over the last two years, especially in the two largest sectors: private housing new build and RM&I. However, cautious optimism is starting to return. Broader UK economic growth, bolstered by lower interest rates and continued real wage growth, along with a stable government, seems to be driving improvements in both consumer and business investment. However, the government's Autumn Budget will be crucial in determining whether this positive trend continues.”
“There are significant opportunities for upside if the new government can improve the delivery of housebuilding and infrastructure. However, there are also persistent risks. The UK construction industry has lost over 10,000 firms in the past two years, with ISG—the sixth-largest construction firm—being the latest casualty, due to high costs, project delays, and skill shortages on fixed-price contracts. Furthermore, concerns remain over whether the government will cut capital expenditure and postpone, delay, or cancel more key infrastructure investments in the short term in order to meet fiscal targets. If so, a downturn in infrastructure activity could overshadow any recovery in housebuilding and RM&I.”
In private housing—the largest construction sector—declining interest and mortgage rates are expected to gradually boost demand across the wider housing market, offering better prospects for housebuilders. The new government has signaled a commitment to increasing housebuilding by proposing significant changes to the National Planning Policy Framework, potentially easing one of the major supply constraints, particularly for smaller builders. However, key issues persist, such as a shortage of planning resources at the local authority level, challenges with nutrient and water neutrality, and requirements for Biodiversity Net Gain. Delays also continue in the construction of high-rise housing and some commercial projects due to uncertainty surrounding the Building Safety Act and limited capacity at the Building Safety Regulator. Despite a 9.0% drop in activity this year, private housing output is projected to grow by 8.0% in 2025 and 7.0% in 2026. There is also potential for stronger-than-expected demand if the Chancellor's Autumn Budget includes measures to stimulate the private housing market and significantly boost funding for affordable housing.
The second-largest construction sector, private housing RM&I, is closely tied to consumer sentiment, real wage growth, and the frequency of home moves, which often lead to significant home improvements within 6-9 months of moving into a property. As the housing market recovers, combined with rising consumer confidence and steady wage growth, RM&I activity is expected to pick up from the second quarter of 2025. Additionally, spending on energy-efficiency retrofits and solar photovoltaic installations has increased over the past two years, with this trend expected to continue, while building safety work provides a stable stream of activity. Private housing RM&I output is forecast to rise by 3.0% in 2025 and 4.0% in 2026, following a 4.0% decline in 2024.
The outlook for non-housing construction sectors remains largely unchanged from three months ago. However, as the government remains the largest client in construction—accounting for nearly a quarter of all projects in the £180 billion industry—the Autumn Budget could have a significant impact on much-needed investment in health, education, and infrastructure.
Infrastructure, the third-largest sector, is expected to grow by 1.6% in 2025 and 3.8% in 2026, following a slight decline of 0.4% this year. Activity remains strong in major projects such as Hinkley Point C and HS2, despite concerns over ongoing cost overruns. Long-term frameworks in regulated sectors like rail, energy, and water continue to support stable activity levels. However, outside of these areas, challenges persist. While investment in water infrastructure is set to increase due to high-profile quality issues, it’s unlikely that this will translate into on-the-ground delivery before 2026, and it may not be enough to offset decreasing activity on projects like the Thames Tideway. Energy infrastructure, however, continues to thrive, with a significant ramp-up in wind farm development.
Commenting on the Autumn forecasts, CPA Economics Director Noble Francis said: “The construction sector has faced a very tough period over the last two years, especially in the two largest sectors: private housing new build and RM&I. However, cautious optimism is starting to return. Broader UK economic growth, bolstered by lower interest rates and continued real wage growth, along with a stable government, seems to be driving improvements in both consumer and business investment. However, the government's Autumn Budget will be crucial in determining whether this positive trend continues.”
“There are significant opportunities for upside if the new government can improve the delivery of housebuilding and infrastructure. However, there are also persistent risks. The UK construction industry has lost over 10,000 firms in the past two years, with ISG—the sixth-largest construction firm—being the latest casualty, due to high costs, project delays, and skill shortages on fixed-price contracts. Furthermore, concerns remain over whether the government will cut capital expenditure and postpone, delay, or cancel more key infrastructure investments in the short term in order to meet fiscal targets. If so, a downturn in infrastructure activity could overshadow any recovery in housebuilding and RM&I.”