The UK construction industry is poised for modest but meaningful growth in 2026, with output expected to increase by 3.5% to 4.5% compared with 2025, according to the latest industry forecasts. However, the building materials sector may take longer to feel the benefit.
Growth Drivers
Energy and infrastructure projects are expected to be the primary growth engines for construction during 2026. The continued demands of energy transition and energy security remain at the forefront, with major renewable energy and grid upgrade projects creating sustained demand for construction services.
The defence sector is emerging as a significant growth area, with increased military spending translating into construction contracts for barracks, facilities, and strategic infrastructure. Government initiatives like the Home Building Fund continue to underpin residential construction activity.
Materials Market Challenges
The Building Merchants Federation (BMF) has downgraded its baseline annual growth forecast from 3.1% to 2.3%, and the building materials market is expected to remain stagnant through the first quarter of 2026. Brick deliveries fell nearly 5% year-on-year, while prices for aggregates and bricks have surged by more than 20% over recent years.
Labour Market
The sector continues to grapple with a structural workforce shortfall, with vacancy levels in core trades — carpentry, bricklaying, electrics, plumbing, and groundwork — not seen for more than a decade. Heating engineers face sustained pressure from retrofit programmes, heat pump installations, and the transition away from gas boilers.
Policy Landscape
Several significant policy changes are on the horizon: new Part G Building Regulations will reduce water usage requirements in new homes from 125 to 105 litres per person per day. The Building Safety Levy takes effect from October 2026, applying to most new residential developments of 10 or more dwellings. Meanwhile, the Government's consultation on a Single Construction Regulator closed in March 2026, with a full response expected in summer.
