The Construction Products Association’s Autumn forecasts, released today, show a sense of cautious optimism returning to the construction industry for 2025, following a tough 18 months for its two largest sectors: private housing new builds and repair, maintenance, and improvement (RM&I). Overall, 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, which is the largest sector, the drop in interest and mortgage rates is helping to revive demand across the wider housing market, offering brighter prospects for housebuilders. The new government has made it clear that they want to boost housebuilding, proposing changes to the National Planning Policy Framework to address one of the major supply challenges, especially for smaller builders. That said, there are still some ongoing issues, like limited planning resources at local councils, nutrient and water neutrality challenges, and requirements for Biodiversity Net Gain. Additionally, delays continue with high-rise housing and certain commercial projects, largely due to uncertainty around the Building Safety Act and the capacity of the Building Safety Regulator. Despite a 9.0% decline in activity this year, private housing output is forecast to grow by 8.0% in 2025 and 7.0% in 2026. If the Chancellor’s Autumn Budget includes measures to boost demand and increase affordable housing funding, the outlook could improve even further.
Private housing RM&I, the second-largest construction sector, is heavily influenced by consumer confidence, wage growth, and home moves—especially since people tend to invest in significant home improvements shortly after moving into a new property. With the housing market recovering, along with rising consumer confidence and steady wage growth, RM&I activity is expected to pick up from mid-2025. Additionally, there’s been a noticeable shift towards energy-efficient retrofits and solar panel installations over the past couple of years, and this trend is expected to continue. Private housing RM&I output is expected to rise by 3.0% in 2025 and 4.0% in 2026, following a 4.0% decline this year.
As for the other construction sectors, things remain fairly stable compared to three months ago. However, given that the government is the largest client in the industry, making up nearly a quarter of all projects, the Autumn Budget could have a big impact on much-needed investments in areas like health, education, and infrastructure.
In infrastructure, the third-largest sector, growth is expected to be more modest, with a 1.6% increase in 2025 and a stronger 3.8% rise in 2026, after a small 0.4% decline this year. Major projects like Hinkley Point C and HS2 are still moving forward despite ongoing concerns about cost overruns. Long-term frameworks in regulated sectors like rail, energy, and water continue to offer steady work. However, there are concerns outside these areas. While investment in water infrastructure is set to rise to address quality issues, it’s unlikely we’ll see significant ground-level progress until 2026, and it may not fully offset the declining activity on projects like Thames Tideway. On the other hand, energy infrastructure, particularly wind farms, is booming and expected to grow even more in the coming years.
Noble Francis, the CPA’s Economics Director, commented on the Autumn forecasts: “The past two years have been tough for construction, especially for the largest sectors like private housing new builds and RM&I. But we’re starting to see some positive signs. The UK economy is growing, thanks to lower interest rates and steady wage growth, and a stable government seems to be encouraging both consumer and business investment. However, the upcoming Autumn Budget will be key to making sure this positive trend continues.”
“There’s a real chance for growth if the government can improve housebuilding and infrastructure delivery. But there are still risks. The UK construction industry has lost over 10,000 firms in the last two years, with ISG, the sixth-largest construction firm, being the most recent example, affected by rising costs, project delays, and skills shortages. There are also concerns about whether the government will reduce capital expenditure and delay or cancel important infrastructure projects to meet its fiscal targets. If that happens, it could slow down infrastructure activity and hold back recovery in housebuilding and RM&I.”
