Growth in the UK construction industry has been downgraded to 1.7% for 2026, almost half the figure predicted three months ago.
The Construction Products Association said the revision reflected continued weakness in housing and commercial building, as well as broader economic uncertainty.
Firms across the industry have reported subdued activity. Sluggish economic growth and weak confidence are delaying investment decisions.
The industry body said recovery would depend on improved confidence among homebuyers and investors.
Housing sector struggles
Private housing is the largest part of the construction sector. It is now expected to grow by just 1.5% in 2026, down from a 4.0% forecast in October.
The CPA said housebuilders were facing difficult choices. They must balance keeping homes affordable for buyers while maintaining viable profit margins on developments.
Rising costs are squeezing margins for smaller builders in areas where demand has remained steady. Where prices have been increased to protect viability, affordability is limiting sales.
A significant increase in housebuilding would require strong demand during the spring selling season. The CPA said this was unlikely without government support for buyers.
Home improvements falling
The home repairs and improvements sector is expected to contract by 1.0% in 2026. It marks a second consecutive annual decline.
Activity remained weak throughout 2025. This was despite falling interest rates and growth in real household incomes. The CPA said homeowners lacked confidence to commit to major improvement work.
The sector also faces the end of the government’s ECO energy efficiency programme in March 2026. Replacement measures under the Warm Homes Plan are not expected to boost activity significantly in the near term.
Infrastructure sustains growth
Infrastructure is forecast to grow by 3.9% in 2026, matching the previous forecast.
Investment in energy generation, power distribution and water infrastructure continues to drive the sector. There has been increased spending at the start of a new regulatory period for water companies.
However, some major projects are scaling down or facing uncertainty. Work at Hinkley Point C nuclear power station is passing its peak. Concerns remain over potential delays to the HS2 rail project. A gap in the roads building programme is also expected.
‘Another difficult year’
Rebecca Larkin is the CPA’s head of construction research. She said conditions that had constrained the industry showed little sign of improving.
Firms were preparing for “another difficult year” with ongoing uncertainty, she said.
Growth was expected to come from more resilient areas. These include commercial refurbishment, energy and water infrastructure, and public building programmes for schools, hospitals and prisons, the CPA said.
