Construction Predictions For 2025

Increased project starts

Construction project starts - projects valued at under £100 million - are forecasted to rise by 8% in 2025 and 10% in 2026¹. This growth is driven by improved consumer and business confidence, as well as strategic fiscal changes. The growth will occur at varying rates across sectors.

Private housing

After two challenging years, the private housing sector is expected to see a 13% increase in starts in 2025, rising to 15% in 2026. This is due to a brighter economic outlook and improved household incomes. One of these key projects is the first phase of Berkeley’s Lombard Square development in south London, which aims to deliver 328 homes. An improvement in household incomes, an easing in mortgage rates and a brighter economic outlook helped to rebuild house buyers’ confidence over 2024.

Social housing

Social housing starts are also predicted to rise by 11% in each of the next two years, supported by a £500 million increase in the Affordable Homes Programme to £3.1 billion². The focus will be on schemes that largely concern houses rather than flats, such as Your Housing’s £90 million Ten Acre scheme in Manchester, which is due to begin construction in 2025. The decline in apartment projects commencing on site may reflect the added cost and delays associated with high rise projects following the introduction of the Building Safety Act.

Commercial building

Hybrid working is driving a shift in demand for new builds and refurbishments, such as Manchester’s forthcoming £92.4 million Mayfield Quarter development and M&G and Prudential’s £80 million project in Merton, south London. There has also been a recent increase in planning approvals connected to a rise in office lettings in the six main regional markets – Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester².

After a strong period of growth, hotel and leisure construction starts will slow to 6% in 2025 and rise to 9% by 2026, with the introduction of lower business rates multipliers for high-street retail, hospitality, and leisure (RHL) properties in 2026-27 likely to stimulate growth in hotel and leisure construction.

One of the biggest retail schemes due to start in 2025 is a £50 million redevelopment of the Merry Hill Shopping Centre in the West Midlands². A steady increase in retail project starts is expected over 2025 and 2026, driven by anticipated growth in consumer spending, which is likely to encourage retailers and developers to advance planned projects.

Technological advancements

The adoption of new technologies and sustainable practices is expected to drive efficiency and productivity in the industry. Utilities work, supported by net zero targets and water industry capital expenditure, shall underpin civil engineering growth, with significant projects such as the £1.3 billion HS2 Euston rail tunnel progressing.

Economic and political stability

Improved economic conditions and political certainty are anticipated to boost investor confidence, particularly in industrial and commercial property markets. The spending commitments in the Budget for 2025/26 should enable government departments to progress existing projects over the coming year.

Key takeaway

Overall, the outlook for the UK construction sector in 2025 is positive, with growth driven by various factors including technological advancements, sustainability, and economic improvements.

Sources

1. UK construction poised for growth from 2025 | Concrete Connect
2. Glenigan forecasts construction boom from 2025 | Glenigan

About the author

Alison Wild BCom (Hons), FMAAT, MATT, Taxation Technician is a highly respected industry professional who has been working with and advising SMEs in areas including tax, pensions, insurance and marketing for over 25 years. She is a fellow member of the Association of Accounting Technicians (AAT) and member of Association of Tax Technicians (ATT). She also has over 25 years' experience as a residential landlord.


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