The UK construction industry
The UK construction industry is forecast to experience notable growth in 2025 and beyond, despite recent challenges.
According to Glenigan, construction output is expected to rise by 8% in 2025, followed by 10% growth in 2026. This optimism is driven by factors like recovering consumer confidence, increased household spending, and government fiscal adjustments aimed at boosting public sector and infrastructure projects
Several key areas are expected to drive this growth:
1. Housing: Private housing starts are predicted to rise by 13% in 2025, following declines in 2023 and 2024. This growth is fuelled by improved investor confidence and more favourable fiscal policies
2. Industrial and Office Space: With a recovery in demand, industrial starts are set to grow by 5% in 2025 and 8% in 2026. The office sector, including data centres, is expected to see an 18% growth in 2025
3. Retail: While consumer demand remains weak, a gradual recovery is anticipated, with project starts predicted to grow by 1% in 2025 and 9% by 2026. Retail Sector Investment: There is also a resurgence of investment in retail spaces, particularly from deep-discount supermarkets like Aldi and Lidl, which are expanding their estates in response to growing consumer demand. This is seen as a bright spot within the retail construction sector
4. Health and Education: The NHS and school infrastructure are also expected to see investment growth, driven by government funding increases
The sector will also need to address challenges such as skill shortages and regulatory compliance. Technology adoption (like BIM and AI) and a focus on sustainability are expected to be key factors in driving long-term efficiency and reducing costs
Investment
Overall, the UK construction industry is positioned for recovery and growth, especially as the economy stabilizes and government policies support vital infrastructure projects.
Investment in the UK construction industry is coming from several key sources, driven by both public and private sector funding.
1. Government Funding: A significant portion of investment is coming from government initiatives. The government has committed to supporting infrastructure projects through increased funding for housing, healthcare, and public sector buildings. For instance, in 2025, NHS capital funding is set to increase by 15%, which will support the construction and maintenance of healthcare facilities. Additionally, the government has prioritized large-scale
infrastructure projects, including the HS2 high-speed rail project and other national transport and energy initiatives
2.Private Sector Investment: The private sector is also playing a pivotal role, especially in housing and commercial real estate. Large construction firms are benefiting from improved investor confidence, which has fuelled demand for residential and office projects. Notably, private housing starts are expected to rise by 13% in 2025, partly driven by investor optimism and supportive fiscal measures
3.Institutional and Foreign Investment: UK construction is attracting substantial investment from institutional investors and foreign sources. International firms, particularly in the real estate and commercial sectors, have been actively funding large construction projects. The office and industrial property sectors have seen robust investment, particularly with the rise of e-commerce fueling demand for logistics spaces
Sources:
· ConstructUK
· The Construction Index
· Glenigan
These diverse sources of investment are expected to drive growth in the UK construction industry, supporting both ongoing projects and the initiation of new ones through 2025 and beyond.