Latest forecasts from the Construction Products Association predict total construction output is expected to grow by 2.1% in 2025 and 4.0% 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.

In private housing an uptick in mortgage interest rates at the end of 2024 suggests that the housing market recovery and demand for new build housing will be slower and more uneven in the first half of 2025.

Overall, private new build housing output is forecast to rise by 6.0% in 2025 and 8.0% in 2026 but the risks remain “weighted to the downside”.

Private housing rm&i is forecast to grow 3.0% in 2025 with a further rise of 4.0% in 2026.

Infrastructure output is expected to rise by 1.4% in 2025 and 4.1% in 2026.

CPA Head of Construction Research, Rebecca Larkin said: “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.

“The government will also play a key role in the industry’s longer-term recovery, through setting long-term funding allocations in the Spending Review in June, delivering construction programmes for new schools, hospitals and prisons, and maintaining promised levels of public investment within the bounds of its fiscal rule.

“As the government came to power on a statement that it was pro-business, pro-investment and pro-growth, the next few years will show whether this is true or whether it was merely rhetoric.”