The Construction Products Association (CPA) has released autumn forecasts for the construction industry in the UK, with cautious optimism gradually returning to two major sectors in the industry for 2025.
According to CPA, the private housing new build and repair, maintenance and improvement (rm&i) sectors were “extremely challenging” in the previous 18 months. Overall, total construction output is forecast to rise by 2.5% in 2025 and 3.8% in 2026 after falling by 2.9% this year.
In the private housing new build sector, the largest construction sector in the UK, interest rates and mortgage rates appear to be falling, leading to a gradual recovery in demand for the broader housing market. This is expected to lead to better prospects for housebuilders.
CPA added that major changes to the National Planning Policy Framework could ease one of the most-cited supply constraints, particularly for smaller house builders.
Meanwhile, the rm&i sector, the second largest in the UK construction industry, is forecast to rise 3% in 2025 and 4% in 2026 after a 4% decrease in activity this year.
This sector is heavily dependent on consumer sentiment, real wage growth and home moves, which drive an increase in significant home improvements within 6-9 months of moving into a property. The expected recovery of the broader housing market, combined with improving consumer confidence and sustained real wage growth, is likely to boost rm&i activity from the second quarter of 2025.
In addition, there has been a shift in home improvement spending over the last two years towards energy-efficiency retrofit and solar work, which continues to remain strong whilst building safety activity also provides a steady pipeline of activity.
CPA said the outlook for construction sectors outside of housing remains similar to that of three months ago. Although the government is the largest client in construction by far, accounting for almost one-quarter of all projects in the £180 billion industry, the Autumn Budget, set to be announced on 30 October, could have significant implications for critically needed investment in infrastructure.
Aside from the two largest construction sectors, infrastructure, the third largest, is forecast to rise by 1.6% in 2025 and 3.8% in 2026 after falling marginally by 0.4% this year.
CPA Economics Director Noble Francis said: “Broader UK economic growth, helped by lower interest rates and sustained real wage growth, combined with a stable government, appears to be leading to improving consumer and business investment.”
He added: “Concerns remain over whether the government will cut capital expenditure and pause, delay, review and cancel yet more investment in key infrastructure projects in the short-term to meet its fiscal rules. If so, falls in infrastructure activity could overshadow recovery in house building and rm&i.”
