Disappointing year for UK construction gives way to industry-wide recovery
Despite 2025 downturn, Glenigan predicts a ‘phoenix moment’ for UK construction in 2026
8% decline in detailed planning approvals year-on-year
11% decline in main contract awards year-on-year
20% decline in project starts against the preceding year-on-year
Today, Glenigan, one of the construction industry’s leading insight and intelligence experts, releases the January edition of its Construction Review.
This special edition covers all major (>£100m) and underlying (<£100m) projects, with all underlying figures seasonally adjusted, and looks back at year-on-year performance to gauge where the industry stands as the new year begins.
It’s a report providing a detailed and comprehensive analysis of year-on-year construction data, giving built environment professionals a unique insight into sector performance over the past year.
Unfortunately, despite performance picking up pace in Q4 2025, it proved to be a disappointing year overall, with activity significantly down against 2024 levels and the values of projects starting on site slashed by a fifth (-20%).
Less severe, yet equally unimpressive, are detailed planning approvals. These dipped by 8% and main contract awards fell by 11%.
There’s little doubt for many across the sector that these lacklustre figures were the result of a perfect storm of domestic socioeconomic uncertainty and ongoing turmoil on the international stage. It’s all leading to what has become a frustratingly persistent pattern of uncontrolled decline.
This is reflected in the stubbornly high interest rates squeezing developers, contractors and subcontractors through the majority of 2025, combined with weak investor confidence, ongoing cost pressures and a period of policy flip-flopping between the Spring Spending Review and the Autumn Budget Statement.
Whilst there were a few pockets of resilience which stood out against a largely gloomy landscape, including Industrial, Offices and Hotels & Leisure, their relative success did little, if nothing, to offset a challenging 12-months for everyone across UK construction.
Commenting on the results, Glenigan’s Economics Director, Allan Wilen, says, “Once again, it feels like the industry has been stuck in a vicious cycle where any established momentum, as we saw in the residential market in the spring, suddenly vanishes sometimes due to the tiniest twitch upon a thread. Issues that under normal circumstances would be unremarkable, can have an immediate impact on confidence and activity, showing how fragile and sensitive the UK and global economy remain.”
However, against this dim backdrop, Allan remains optimistic for the year ahead. He continues, “Despite these poor results, we’re starting to see stability return, particularly a surge in Non-Residential work, noted in our most recent Index. Whilst it’s going to take a little time, the Chancellor’s Autumn Statement gave a far clearer funding commitment which will hopefully get shovels in the ground, plans approved and contracts awarded on a wide range of capital projects. This could further be the key to unlocking both private investors and in turn, consumer confidence; we’re already seeing the key starting to turn with a recent upsurge in Office and Industrial activity. It highlights that, whilst UK construction is certainly down at the start of 2026, it’s by no means out.”
Taking a closer look at sector vertical performance and 2026 predictions…
2025 high-risers
There were a handful of stand-out verticals in 2025. Office and Industrial had an extraordinary end to the year, with project starts sky-rocketing compared to 2024, posting 32% and 31% increases, respectively.
A range of Manufacturing, Warehouse and Logistics projects accounted for the bulk of Industrial starts, with Yorkshire & The Humber (+39%), South East (+30%) and Wales (+1616%) recording positive performance against the previous year.
Despite a weaker pipeline with both planning approvals (-37%) and main contract awards (-2%) down from last year, the 2026 outlook appears bright with a 12% forecast growth. This has likely been prompted by higher consumer spending boosting demand and the commencement of the landmark £1.4bn Cable Factory at Hunterston in Scotland.
For Offices, growth was predominantly driven by an increase in new build and refurbishment projects, whilst an increasing public dependence on data and AI has also increased demand for data centres (which sit in the category). Similar to Industrial, next year’s forecast is bright, with a 13% performance increase expected, prompted by an insatiable appetite for digital technology encouraging more data centre construction as well as the Government’s Tech Prosperity Deal which promises a £30bn investment to create an AI ‘Growth Zone’ in the North East.
Welcome surprises
Perhaps the most welcome surprise came in the form of an uptick in Hotel & Leisure project starts (+12%), driven by an increase in major projects. Sub-sector performance was particularly robust with indoor leisure facilities work jumping 109% on a year ago and sports facilities growing 59% year-on-year. Looking regionally, the South West, West Midlands and Wales were the biggest winners, all recording performance increases for both starts and planning approvals. Looking ahead to 2026, a more modest 5% growth is forecast, spurred on by an increase in tourism and the keenly-anticipated £450m 380 Kensington High Street, London Hotel development.
Solid results were also recorded for Community & Amenity, which saw a 68% increase in project starts year-on-year in both major projects (>£100m) and underlying projects (<£100m). The 2026 outlook looks a little less sunny, with project starts expected to decline by 16% in 2026.
Pipeline positivity
Although Civils registered the biggest losses starts-wise by a significant margin, falling 56% compared to the previous year, it posted a strong pipeline with a small, yet significant increase in main contract awards (+1%) and an exponential rise (+90%) in detailed planning approvals year-on-year. These latter figures suggest that although delivery remained subdued, conditions are in place for a recovery in starts as schemes progress to site.
Roads accounted for the largest share of projects, with an 138% performance increase year-on-year, with harbours and ports also seeing their percentage value grow by triple digit figures (163%). Regionally, the East of England was the most active in project start terms accounting for over a quarter (27%) of activity, despite a 53% performance decline year-on-year. The South East stood out for planning approvals, rising a whopping 341% year on year.
17% growth is forecast for 2026, with electricity networks and renewables charging the vertical forward. That’s not all, water industry investment programmes will also support sector activity in the future.
Decline & fall
All other verticals experienced a downturn in fortunes over the course of 2025.
Housing, having shown so much promise at the outset of the year, took a massive hit after the increase in tax duty in April and continued to decline from there as high inflation delayed the lowering of interest rates. However, the 2026 forecast looks rosier with 6% growth predicted following the recent interest rates cut, further buoyed by the Social and Affordable Homes Programme.
With low consumer confidence throughout the year, Retail was unsurprisingly depressed. Performance fell across the board, mainly due to cost pressures in the second half of the year, resulting from increased National Insurance contributions, minimum wage increases, high inflation and interest rates. These pressure cookers-worth of challenges have resulted in a flat forecast for 2026.
Health and Education also experienced holistic declines in performance. For the former, starts on site dropped by a fifth (-21%) and by a quarter for the latter (-26%). The main reasons for this have been continued pressures on public finances, delayed funding allocations and rising costs which have stalled the progression of new healthcare and learning facilities. However, both verticals are expected to return to growth, with performance increasing by 4% and 15%, respectively.
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