NEW research has revealed that UK construction output is set for a ‘gradual recovery’ this year and next, following two challenging years that have particularly affected the private new build housing and repair, maintenance and improvement (rm&i) sectors.
The findings were revealed in the Construction Products Association’s (CPA) Winter forecasts. Total construction output is expected to grow by 2.1% in 2025 and 4% in 2026. The recovery for this year is a downward revision compared with 2.5% growth expected in autumn, given the prospect of slower economic growth, higher inflation for longer, and fewer interest rate cuts than previously expected.
An uptick in mortgage interest rates at the end of 2024 suggests the housing market recovery and demand for new build housing will be ‘slower and more uneven’ in the first half of 2025. The CPA said much will depend on how quickly mortgage rates start to fall again and the impact this has on the housebuilders’ key spring selling season.
Private housing rm&i is the second-largest construction sector and with households experiencing sustained real wage growth and slight falls in interest rates, an expected rise in home moves should drive home improvement projects, although this is most likely to occur in the second half of 2025.
In infrastructure, the CPA said activity ‘remains strong’ on major projects such as Hinkley Point C and HS2. Energy infrastructure activity continues to grow as wind farm projects resume and increases in capital expenditure in the water sub-sector to deal with high-profile water quality issues leads to activity ramping up from 2026.
Rebecca Larkin, CPA head of construction research, commented, “After a difficult couple of years, it is a welcome return to growth forecast for the construction industry in 2025 and 2026, although the recovery is set to be more gradual than in our forecasts before the autumn budget. With stubborn inflation meaning interest rates are unlikely to be lowered as much as previously expected, it adds fresh uncertainty to the point at which potential home buyers and existing homeowners will feel comfortable and confident enough to proceed with their largest spending decisions and get a sustained recovery in new house building and rm&i underway.
“This recovery is expected to occur in the second half of the year, combining with the current areas of growth such as energy-efficiency improvements, commercial refurbishments and energy and major infrastructure projects to establish a broader recovery across construction as the year progresses.”
