Strengthening economic growth and rising confidence in market stability are driving a promising resurgence in the UK construction industry over the next two years. According to Glenigan’s UK Construction Industry Forecast 2024-2026, construction project starts will experience substantial growth, with an 8% increase projected for 2025 and 10% for 2026. These optimistic projections follow the stabilization of market conditions and the gradual recovery of consumer and business confidence, which have bolstered activity levels across various construction sectors. Despite challenges in recent years, including a 6% decline in civil engineering project starts in 2023 and uncertainty surrounding major infrastructure projects, the sector is regaining momentum, signaling a more stable and productive period ahead.
Civil engineering projects for fuel recovery
A significant factor in the industry’s rebound has been the strong performance of civil engineering projects in 2024. Project starts in this sector rose by an impressive 26%, reversing the previous year’s decline. Despite the cancellation of several large-scale infrastructure developments, underlying work on projects valued under £100 million has largely driven the sector’s growth. The report anticipates steady growth in civil engineering during the forecast period, with utility projects serving as a major driver. In particular, water companies’ ambitious investment plans are expected to double capital expenditure to £96 billion for AMP8, the next five-year regulatory control period. Key initiatives include new reservoirs and river quality improvement projects. Regulators may scale back some of these plans, but Glenigan predicts a substantial increase in water industry investment to support long-term sector activity.
Modest Performance Dip for 2024
Forecasts for 2024 indicate a modest 1% decline in construction performance, a significant improvement over the 7% decline in 2023. This outcome has been attributed to the stabilization of project starts following the UK election and a gradual rise in private sector work levels.
Development pipelines also appear robust, with main contract awards up by 7% compared to 2023 figures. As investor confidence strengthens, we expect this upturn to spur renewed growth in industrial and office construction. The firm pipeline of development projects provides a solid foundation for future sector activity.
Public Sector Investments and Infrastructure Projects
Government-backed initiatives and public-sector projects are poised to play a key role in the construction industry’s recovery and growth. The recent UK budget introduced adjustments to fiscal rules, enabling higher levels of capital investment. This change is expected to unlock a wave of public-sector and infrastructure projects over the next two years.
Notable infrastructure developments include the green light for the HS2 rail tunnel to Euston and the government’s commitment to other key rail projects, such as the TransPennine route upgrade and the East-West rail link. These projects will contribute to steady sector growth, with a 5% increase forecast for 2025 and a further 7% rise in 2026. The upcoming spending review is anticipated to clarify funding allocations and timelines, offering additional assurance to stakeholders.
Outlook for Growth
Overall, Glenigan’s forecast highlights a bright future for the UK construction industry, with recovery expected to gain significant traction from 2025 onward. The combination of public sector initiatives, private sector resilience, and substantial investments in utilities and renewable energy creates a strong growth trajectory.
Allan Wilen, Glenigan’s Economic Director, notes that the sector is well-positioned to capitalize on these opportunities. “The construction sector is on track for growth from 2025,” he said. “The recent Budget’s adjustments to fiscal rules, allowing for higher levels of capital investment, will also unlock significant public sector and infrastructure projects, providing a much-needed boost to government-funded initiatives over the next two years.”
