Construction analysis
Challenges and opportunities
Output and new orders
Construction output: +0.1% in Q3 2025
New work orders: +9.8% in Q3 2025
Construction output increased slightly in the three months to September 2025, with most growth coming from maintenance and repair, not new project starts.
New work orders rose by 9.8% during the quarter. But this just about offsets the decline seen in Q2. When tracked over a longer period, the data suggests low confidence in new project delivery.
According to the S&P Global UK Construction PMI, August was the eighth month of declining activity. Only 34% of firms expected growth; 22% predicted decline.
Our own research backs this up. We surveyed to over 1,000 senior decision-makers globally. UK respondents said that 26% of their projects were delayed last year, 21% were cancelled and 25% were scaled back due to uncertainty. The main causes were material cost inflation, supply chain disruption and volatile energy prices.² Many expect these pressures to intensify over the next one to two years.³
Labour shortages are also affecting delivery. Nearly a third of respondents said their projects had been delayed due to a lack of skilled or unskilled workers.⁴
Growth forecasts and sector trends
Despite these challenges, there are signs of recovery. Experian forecasts that construction output will grow by 2.1% in 2025, 3.4% in 2026 and 4.3% in 2027.
Housing is expected to grow 1.4% in 2025, accelerating to 9.5% by 2027.
2 Risk factors impacting project delivery in the UK (% indicating ‘high impact’ on ability to meet project goals): material cost inflation (84%), supply chain disruption (69%) and energy price volatility (68%).
3 Risk factors expected to worsen in the next 12-24 months (% of UK respondents expecting situation to deteriorate): material cost inflation (57%), supply chain disruption (52%) and energy price volatility (54%).
4 29% of respondents reported that their projects had been delayed by skilled labour shortages, 28% by unskilled labour shortages.
Where opportunity lies
Public–private partnerships (PPP)
Strategic partnerships between public and private sectors will be essential for growth. The government’s £25 billion Roads Investment Strategy 3 (RIS3) will run through to 2030. Other major programmes in healthcare, education and justice are also likely to create new opportunities.
In the Budget, the Chancellor announced significant sums for investment in Northern Ireland, Scotland and Wales. However, the Budget offered little clarity on how the industry can engage with government to maximise this investment, unlock programmes and deliver much-needed infrastructure.
Data centres
Recent research by Barbour ABI calculated that data centre capacity is set to grow 20% over the next five years. The £10 billion AI-focused facility in Blyth leads the charge. Developers are adapting, with data centres appearing in mixed-use schemes.
But power is a constraint. The UK’s energy grid is under pressure, and energy planning must now sit at the heart of every data centre project. Those involved in delivery need to build strong partnerships with developers, investors and local authorities from the start.
Regional development and masterplanning
Ambitious regeneration is being led by combined and mayoral authorities. Examples include:
— Greater Manchester’s £4.2 billion Old Trafford redevelopment
— Leeds’ Vision 2030, starting with a £100 million upgrade of Leeds Bradford Airport
These initiatives are creating opportunities not just for major schemes, but also for supporting developments in surrounding areas.
Masterplanning at this scale needs specialist input. Success depends on careful phasing, cost control and risk management. An understanding of policy is also key. This can evolve during the life of a project. It’s important to think about what might change and develop options for potential scenarios.
We help organisations shape masterplans that are flexible, commercially sound and future-ready. This approach helped Network Rail gain planning consent for the 30-acre Bow Goods Yard redevelopment in east London. We apply the same thinking to projects across the UK and around the world.
Materials and commodities
BCIS material price index: +0.8% in Q2 2025
Deliveries of bricks, cement and concrete: all fell over the year to Q3 2025
Material production fell in Q3. Brick output was down 5.2% year-on-year, and ready-mix concrete sales dropped by 4.3%. In contrast, concrete block supply increased by 2.7%.
The Building cost information service (BCIS) materials price index showed a small rise of 0.3% in Q2 2025. For the full year, BCIS forecasts a 0.5% increase, rising to 2.3% in 2026 and 3.2% in 2027. The long-term average for general building cost inflation is 3.7%.
While prices are more stable, the market remains volatile. Good practices like lead time planning, supplier diversification and strong contingencies remain essential.
Procurement
Construction industry vacancies: -25.9% in Q3 2025
Construction insolvencies: -1.0% in Q2 after rising for three quarters. But fragility remains. Major players continue to fail.
In our last report, we predicted stronger pipelines in late 2025 and early 2026. That remains the case, but we now expect growth to be slower.
Staged approvals and phased funding are adding uncertainty. Projects can be paused or cancelled at short notice. This makes planning, estimating and getting contractors engaged in schemes harder to manage.
For higher-risk buildings, the key milestone has shifted. Instead of planning, Gateway 2 is now the point when real certainty is achieved. This means that organisations are committing more funding upfront, before knowing whether a project is fully viable.
Other challenges are also affecting delivery. These include access to infrastructure, such as electricity, water and sewage, the rising cost of finance, supply chain instability and the time needed to meet regulatory demands around net zero, biodiversity, and sustainability.
To succeed, decision-makers need sharp thinking, strong evidence, and delivery experience. Off-site methods can help, but only when backed by proof. Strong choices come from clear thinking, not just good ideas.
We support decision-makers in weighing options, managing risk and moving forward with confidence.