UK construction activity was forecast to recover over the next two years after a difficult 2025, with Glenigan anticipating an 8% rise in the underlying value of project starts in 2026 and a stronger 13% uplift in 2027.

The outlook pointed to gains across housing, offices and industrial schemes, alongside a revival in public sector work as Spending Review allocations and potential tax changes bolster investment. The forecast covered underlying projects worth up to £100 million.

Allan Wilén, Glenigan’s economics director, said: "An improving economy combined with rising public sector investment is expected to support growth in construction activity during 2026 and 2027. The upturn in consumer discretionary spending has been slow to filter through to related areas such as private housebuilding, retail, and hotels & leisure construction, but a further improvement in household incomes over the next two years is expected to support growth in consumer-related sectors. Whilst lower interest rates helped to support a recovery in industrial logistics and office construction this year, a firmer and broader rise in business investment is forecast from 2026 as strengthening economic growth and further interest rate cuts lift business confidence. Completion of the Spending Review has also now provided greater clarity and is expected to support a strengthening in departmental investment programmes during 2026 and 2027."

Housing was expected to be a key driver. The Labour government had pledged 1.5 million homes over the parliament. Although 2025 housebuilding starts were constrained by delays at the Building Safety Regulator (BSR), the regulator was aiming to clear the backlog by year-end, paving the way for faster progress in 2026 and 2027. Mr Wilén explained: "Rising real incomes and further interest rate cuts are expected to lift house-buyers' confidence from 2026. Supply side restraints are also expected to ease as the BSR reduces the backlog of projects awaiting approval." Glenigan expected private housing starts to grow by 6% in 2026 and a further 18% in 2027. Pipeline examples included the £75 million Sparkle Street development in Manchester, due on site by Q2 2026.

Social housing starts were estimated to have edged up 2% in 2025, then to expand in line with the private sector in 2026 before adding another 12% in 2027, with a focus on low-rise schemes. "Additional funding commitments in the Spending Review and greater access to private sector funding are expected to support a strengthening in housing associations’ development pipelines," he added. A resurgence in student accommodation was also anticipated as developers respond to buy-to-let landlords exiting the student lettings market, with a £90 million, 412-unit scheme in Ealing among those due to start in the next 12 months.

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In commercial markets, the office sector had already seen growth in the underlying value of starts during 2025, and Glenigan projected a further 13% increase in 2026. Mr Wilén explained: "Lower borrowing costs have renewed investor confidence, supporting a rise in both refurbishment and new build projects. While detailed planning approvals have been easing, there remains a strong pool of previously approved projects that can be brought forward for development." Office schemes with consent and expected to get under way within a year ranged from the £80 million 31 Wellington Street project in Leeds to the £200 million 65 Gresham Street development in the City of London.

Industrial work had been hampered in 2025 by geopolitical tensions and US tariffs that dampened manufacturing investment, although logistics activity held up. Demand from online retailers was expected to lift underlying starts by 12% in 2026 and by another 13% in 2027. Notable projects with detailed permission and due to begin in the next year included the £55 million Dynamo Park in Stockton-on-Tees and the £100 million Capitol Industrial Park in Brent, north London.

Public sector work was set to regain momentum. With Chancellor Rachel Reeves widely expected to announce tax rises in the forthcoming Budget to stabilise the public finances, promised construction investment was expected to be protected. In health, underlying NHS starts were forecast to drop 24% in 2025 but then rise 4% in 2026 and 15% in 2027. Mr Wilén said: "The Spending Review and NHS plan signal a sustained increase in capital funding, which will take effect from next April. This is expected to enable NHS trusts to address the repair backlog across the existing estate." The £45 billion hospital rebuilding programme, running to 2039, was set to generate significant opportunities, with the £220 million Cancer Research Hospital in Cambridge due to get under way next year.

Education work was projected to fall sharply in 2025, with underlying starts down 27%, before rebounding by 15% in 2026, supported by additional funding set out in June’s Spending Review. Mr Wilén commented that current activity would be underpinned by the school rebuilding programme and ongoing commitments to address Reinforced Autoclaved Aerated Concrete issues in school buildings. Growth in education was expected to moderate in 2027 but still add 4%.

Civil engineering was also poised for gains as the UK modernises infrastructure, expands renewables and invests in more resilient utilities. Starts were expected to have fallen 7% in 2025, before rising 17% in 2026 and a further 15% in 2027. Mr Wilén explained: "A sustained increase in infrastructure projects is anticipated, following the Spending Review, which provided additional investment for the road and rail networks from 2026/27."

Major schemes due to start within a year included the £208 million North Hykeham Relief Road and a £672 million restoration of the Don Valley Line in Yorkshire. "Utilities work is also expected to grow, driven by higher investment in electricity generation and distribution to support the UK’s net zero transition, as well as increased capital spending by the water industry," he added. Water companies were establishing major frameworks for the AMP8/9 period; Thames Water’s major projects framework was expected to channel £5 billion between 2026 and 2030.

In consumer-facing markets, tax rises could temper spending, but conditions were still set to improve. Underlying hotel and leisure starts were forecast to rise 5% in 2026 and 12% in 2027. Schemes expected to start in the next 12 months included a £50 million aparthotel in Edinburgh and a £90 million refurbishment of London’s Saville Theatre. Inbound tourism was expected to strengthen, while regulatory changes should aid investment. Mr Wilén explained: "The introduction of permanently lower business rates multipliers for high-street retail, hospitality, and leisure properties in 2026/27 is also expected to stimulate hotel and leisure construction. This measure will reduce long-term operational costs, making investments in new developments, expansions, or upgrades more financially viable for businesses."

Retail construction was expected to stabilise after an anticipated 21% fall in 2025, with underlying starts broadly flat in 2026. Projects due on site included a £106 million redevelopment of the Marks & Spencer store at Marble Arch and the £80 million second phase of St James Market, both in London.

With momentum building in both private and public sectors, Glenigan expected 2026 to mark the start of a sustained upswing in workloads for the construction industry, followed by broader and stronger growth into 2027.