An improving UK economy and rising public sector investment are expected to lift construction activity over the next three years, according to economists’ latest industry forecast.
Glenigan’s UK Construction Industry Forecast 2025-2027 UK predicts the economy is set to grow by around 1 per cent in 2025, with rising consumer and government spending expected to be the main drivers.
Focused on underlying starts at less than £100 million in value, the forecast contains an overview of the current state of the construction industry and its outlook for the next three years.
This translates into £70.3 billion in the value of underlying project-starts in 2025, £77 billion in 2026, and £85.3 billion in 2027, with growth across the board.
Private housing is expected to be the biggest driver, however, with starts across the three years increasing 29 per cent from £27.3 billion in 2025 to £35.3 billion in 2027.
Rising household incomes and lower interest rates are considered to help lift housing market activity and new house sales.
Community and amenities see the least growth at 1.2 per cent, with education seeing the second least with 7.3 per cent.
These figures are expected to improve from 2026 due to increased public sector investment.
The forecast notes that rising business and public sector investment will take longer to gather momentum but will provide increased support to construction from 2026.
The government’s long-term capital funding commitments and priorities, including a renewed commitment to delivering net zero, from the spending review are also expected to support stronger public sector construction activity in the second half of the forecast period.
While a gradually improving UK economic outlook and lower borrowing costs support a progressive strengthening of private sector investment over the forecast period for non-residential sectors as geopolitical turbulence eases.
Glenigan’s economics director, Allan Wilen said: “Public funded investment was disrupted last year by the general election and the subsequent post-election review of existing programmes by the new government.
“Subsequent spending commitments for 2025/26 in the budget and spring statement have provided greater clarity and should enable government departments to progress existing projects during 2026.”
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