For more than two years, the UK construction sector has been waiting for a recovery that always seems just one more forecast away. Each quarter brings another set of predictions projecting imminent growth, only for the next report to quietly revise them down. The much-anticipated rebound is always coming “later this year,” or “from Q3 onwards,” or “once interest rates stabilise.”
Yet on the ground, contractors are folding, pipelines are thinning, investors remain cautious, and planning delays continue to mount. The discrepancy between paper optimism and lived reality is widening. The question many across the industry now ask is simple: where did all the growth go?
The Problem at the Heart of Construction Forecasting
The issue sits at the heart of construction forecasting. Most forecasts rely on models that assume rapid economic normalisation and frictionless delivery. They use planning approvals, contract awards and historic delivery ratios to project future output, but these inputs consistently overstate what will actually materialise. The models assume interest rates will ease, that confidence will return, that stalled sites will restart, and that political clarity will unlock public-sector spending. In short, they assume improvement faster than the system can realistically deliver it.
Structural Factors Suppressing Growth
Several structural factors explain why the recovery keeps slipping away. The planning system is slower than ever, with approvals down and decision times up. High financing costs have severely reduced scheme viability; even with inflation falling, elevated borrowing costs are now the new normal. Investor behaviour has shifted, with capital becoming more selective and more risk-averse across commercial sectors. Public spending, although large in theory, moves slowly in practice as election cycles, programme reviews, procurement delays and value engineering all push delivery further into the future. Contractor insolvencies are reducing industry capacity, making it harder for the sector to convert planning approvals into actual starts. Many approved schemes — especially in housing and retail — are now delayed or shelved altogether. Forecasts rarely account for these failures.
A Realistic Outlook for the Next 12–24 Months
A realistic outlook for the next 12–24 months is more challenging than any published forecast suggests. Private housing is unlikely to stage a meaningful recovery until interest rates materially fall, and that may not happen until well into 2026. Commercial development remains structurally suppressed outside of refurbishment and fit-out. Logistics and industrial construction, once buoyant, have softened under higher yields. Retail continues its long-term contraction. Public-sector programmes in education and health offer some support but cannot offset the scale of the private slowdown, especially with delivery delays continuing. Infrastructure remains uncertain, particularly after the reconfiguration of HS2.
The truth is that growth did not suddenly disappear. In many cases it was never truly there to begin with — at least not in the volumes that forecasts suggested. The optimism was built on pipelines that would not convert, investment that would not return on schedule, interest-rate cuts that did not materialise, and confidence that never fully recovered.
What the Industry Needs Now
Construction is entering a period where accurate diagnosis is more important than hopeful projection. The organisations that will emerge strongest from this period are those that plan for lower activity levels, diversify their exposure, strengthen balance sheets, and pivot into segments that will deliver reliable demand, such as refurbishment, energy and sustainability upgrades, compliance-driven works, water infrastructure, and select rail renewals.
Above all, the industry needs realism. Businesses providing unrealistic forecasts need holding to account – we do not need another optimistic forecast, but a clear-eyed understanding of what lies ahead. Growth is not returning quickly — and the sooner we acknowledge that reality, the better positioned we will be to navigate the challenges and opportunities of the next cycle.
The Bulletin: Construction Forecast 2026
To continue the conversation and gain deeper insight into what lies ahead, join Tolga Necar, Head of Consultancy at Barbour ABI, for “The Bulletin: Construction Forecast 2026.” He’ll be joined by a panel of leading industry experts to unpack the emerging trends, market forecasts and structural forces shaping the construction landscape in 2026.
This session will provide clear, evidence-based perspectives on how different segments of the supply chain are preparing for the year ahead — offering valuable intelligence for anyone navigating strategic planning, operational decisions or shifting market conditions.
