Regional analyses
UK & Europe
France
Cost escalation: 3%
Economic growth: 1% ¹⁵
France is likely to see less construction work in 2026. The main reason is the collapse of the residential housing market. Many developers have paused new housing schemes. Demand for offices is also weak. Vacancy rates are high, and occupiers are taking less space. Despite this, some sectors are still holding up, including infrastructure, logistics, data centres and energy efficiency upgrades.
Costs are still rising. Tender prices are forecast to increase by 3%. Labour will be the biggest pressure point. Skilled technical and specialist trades are particularly hard to secure. That is pushing wages up and will slow delivery. Contractors are also carrying higher financing and overhead costs, and that is feeding into prices. Metal prices remain volatile, linked in part to the war in Ukraine, especially steel, aluminium and copper. On top of that, many specialist MEP (mechanical, electrical and plumbing) components and building-services equipment will see longer, less predictable lead times, once again leading to increased cost and potential delays. As a result of this data centres will likely face the highest cost pressure, at +4% to +6%.
In 2026, the priority must be delivery. Planning matters, but being ready to act is what counts now. In France, many projects are on hold. Delays are caused by strict rules, permits and rising costs. Political uncertainty is making things worse. Delayed budgets, unstable leadership and inflation are shaking investor confidence. Globally, tensions between countries are changing investment flow. More funding is now going to defence and healthcare. That means less going into traditional real estate projects.
Germany
Cost escalation: 2-3%
Economic growth: 0.8% ¹⁶
Germany will return to modest growth in 2026, after two years of recession. Growth, and with it construction activity, should improve if public funding is released. The plan is for large spending on infrastructure and defence. But the laws needed to spend that money are not yet in place, so timing remains the key issue. That uncertainty is already affecting decisions. Overall, however, construction activity is expected to remain flat.
Cost escalation is forecast at 2-3%. Due to factors such as the conflict in Ukraine, energy and material prices will be volatile (particularly steel, timber, copper and insulation). Labour costs are rising too. The minimum wage is set to increase to €13.90/hour in 2026, which will raise costs by up to 12% in labour-heavy trades.
Data centres are a clear growth area. Investment is significant, including major commitments from global developers. However, specialised tech skills are scarce, and many teams are still building experience with the delivery expectations of international investors.
Ireland
Cost escalation: 2-3%
Economic growth: 3.1% ¹⁷
Ireland should see increased construction activity in 2026. The sector is expected to grow by about 4.8% per year from 2026 to 2029.¹⁸ Public funding through the National Development Plan and private investment are both supporting demand. Housing remains a priority, with around 40,000 new homes expected in 2026.
Costs are expected to rise by 2-3%. Labour is the main driver. Sectoral Employment Orders will keep lifting labour costs, while specialised and technical skills, especially MEP, are in short supply. Capacity limits, slow planning decisions, and access to utility grid connections also threaten programmes. Rising demand for key resources and short supply is an ongoing issue in Ireland, but the MEP supply chain is a known weak point. Early planning will be critical for project success across the board.
Italy
Cost escalation: 2-3%
Economic growth: 0.8% ¹⁹
Italy’s construction market looks uneven in 2026. The biggest slowdown will be in housing. Residential construction is expected to fall by 7.5%.²⁰ This is the result of fewer building permits, the end of the Superbonus scheme (a tax incentive covering up to 110% of costs for energy efficiency upgrades and seismic risk reduction), weak confidence, and high interest rates. Commercial and industrial work is also expected to dip, linked to reduced tourism, tariff pressure on exports, and declining industrial activity. Infrastructure is a bright spot. It is expected to grow by 1.5% a year from 2026 to 2029, supported by the NRRP (National Recovery and Resilience Plan) investment in energy, rail, and transport.
Costs are still expected to rise by 2-3%. Labour will be the main challenge, with shortages pushing wages up and slowing delivery. Construction labour costs were running at 5.5% up year-on-year (June 2025).²¹ Energy price swings and tighter energy and compliance rules will also add cost and time.
Delivery risk in 2026 is real. Infrastructure will be among the hardest hit, with delays reported where projects compete for the same specialised skills. Materials for standard projects are generally available, but big public programmes can still create local pinch points. The bigger risk sits with imported and specialist equipment, where lead times are less predictable. This will be a problem for projects that rely on complex MEP systems, such as data centres.
Spain
Cost escalation: 1.6%
Economic growth: 2.2% ²²
Spain should see growth in 2026. Domestic demand is driving this, with private spending supported by a stronger labour market, rising real incomes, and easing inflation. Construction growth is expected to be strongest in high-tech, hospitality, and residential. In housing, demand is still well ahead of supply, which will support a steady pipeline.
Construction costs are forecast to rise by 1.6% in 2026. Energy costs and a stronger euro are the main drivers. Labour is already a constraint across all sectors. The workforce is ageing and turnover is high, which makes resourcing harder. Supply risk sits mainly with imports. Trade tensions, tariff hikes, and disruption on global shipping routes may increase costs and extend delivery times.
Politics and wider global tensions may slow some decisions. The biggest impact is likely on projects with high upfront costs or a long payback period. At the same time, stricter environmental and energy-efficiency rules will add complexity and cost. Although, they also create clear opportunities for green projects.
UK
Cost escalation: 3.6%
Economic growth: 1.5% ²³
UK construction activity is expected to increase in 2026, but it won’t happen overnight. The Government has set out major investment plans across healthcare, transport, energy, data centres, housing and regional regeneration. Much of this work has long lead times because of planning, complex procurement, and the need to secure private finance. There’s growing momentum in the private commercial sector, as developers respond to strong demand for high-quality space. This, alongside a solid pipeline of new sports stadium projects, could help drive regeneration in towns and cities across the UK.
The expectation is that workload will build over the next 12-18 months.
Construction costs are forecast to rise by 3.6% in 2026. The main drivers are labour costs, energy prices, and the impact of regulatory change. Growth is expected to be strongest in data centres, healthcare, and sports and leisure. Delivery planning will matter as much as budget. Large schemes may see higher inflation where labour agreements are needed to secure resources, and where big projects draw people, materials and equipment away from other work. That “pull factor” can change local market conditions quickly. Smaller projects and fit-out work should stay more competitive. Labour availability is still a risk, especially for MEP technical skills, while supply chains are expected to stay broadly steady.
Viability remains a key concern. Uncertainty, inflation and finance rates are making many projects borderline, which is why developments are proceeding slowly, stage by stage. Even with a strong pipeline, progress is likely to be cautious in 2026, with many programmes taking time to move from intent to site.
15 Projections Macroéconomiques | Banque de France, Présentation du projet de loi de finances pour 2026 | Ministère de l’Économie
16 Deutsche Bundesbank
17 Bank of Ireland
18 Ireland Construction Industry Report 2025 | Business Wire
19 Istituto Nazionale di Statistica, Italy
20 Nomimsa, Italy. ANCE - Associazone Nazionale Costruttori Edili and Currie & Brown estimate
21 Eurostat, the European Commission and Currie & Brown estimate
22 OECD Economic Outlook
23 Economic and Fiscal Outlook | Office for Budget Responsibility
“2026 is about turning intent into buildable projects. Viability is tight, regulation is adding time and cost, and MEP capacity is stretched. The projects that progress first will be the ones that set scope and funding early, then build in flexibility through procurement and phasing so change does not turn into delay.”
Richard Hill
Director, UK
Currie & Brown