Total construction output is now only forecast to grow by 1.1% in 2025 and 2.8% in 2026 – down from previous predictions of 1.9% in 2025 and 3.7% in 2026.

Firms across the construction supply chain are reporting that activity has slowed since the Spring, particularly in private housing, infrastructure roads, and commercial new build offices.

In private housing output is forecast to rise by 2.0% in 2025 and 4.0% in 2026, a revision down from the previous forecast of 4.0% in 2025 and 7.0% in 2026.

After large falls in demand between 2022 and 2024, house builders continue to highlight that demand and affordability remain the biggest challenges in areas of the country where house prices are higher.

In parts of the country in which house prices are more affordable, site viability is a key problem due to the long list of additional costs that government continues to add to building.

In infrastructure, output is expected to rise by 1.9% in 2025 and 4.4% in 2026 with large variations across the sector.

Water and sewerage, as well as energy generation and distribution, are set to become key drivers of growth next year as activity ramps up under record investment plans.

In contrast, road spending is expected to decline over the next few years as the next Road Investment Strategy (RIS) is not only delayed but headline funding has been cut compared to the previous RIS2.

In rail, there are rising concerns regarding whether the government’s HS2 ‘reset’ may lead to delays going forward, whilst question marks continue over when major projects such as Euston station will commence given the intention for it to be privately financed.

CPA Head of Construction Research, Rebecca Larkin, said: “The pickup in construction activity that had been expected at the start of the year has not materialised as uncertainty continues to hold back house purchases, home improvements spending and private sector investment decisions.

“The risks and uncertainties around the impact of impending tax rises in the Autumn Budget in November have only intensified and this is likely to leave households and businesses holding off spending and investment for longer, and limit demand in the largest construction sectors.

“The effects of pre-Budget uncertainty are being felt now but the impact of the Budget tax rises will be felt most strongly as we head into 2026.

“Currently, the forecast is for 2.8% growth in construction output next year, primarily driven by public sector construction, infrastructure and house building. However, the extent of the government’s tax rises and spending cuts, and who bears the brunt of them, will heavily determine whether 2026 is a year of growth or contraction for the industry.”