Total UK construction output is now forecast to grow by 1.9% in 2025 and 3.7% in 2026 – a slight downward revision compared with the forecast at the start of the year. Construction had a relatively slow and erratic start to 2025, with activity in January being weather-affected, and activity in February remaining subdued. Activity in March and early April showed an improvement, but both housebuilders and contractors were more cautious than six months ago regarding prospects for 2025.

Even excluding the impacts of US tariff disruption and the beginning of world trade wars in April – which may lead to sharp downward revisions in global and UK economic growth or even recessions – a flat economy was already a concern for the UK; economic growth was only 0.4% in 2023 and 1.1% in 2024. Over the last three months, UK growth forecasts for 2025 have been revised down to only 1.0%, and inflation is expected to remain higher for longer.

The government’s Spring Statement focused on broadly maintaining capital expenditure and identifying cuts in day-to-day spending to ensure it sticks to its fiscal rules. The government also announced £625m for construction skills and £2bn for social and affordable housing; in addition, the building safety levy was delayed for a year. The government has also provided an additional £2.2bn for the Ministry of Defence. 

In terms of key risks, the US tariff disruption poses a large threat of causing global and UK economic growth turmoil. At the very least, it has raised the level of uncertainty considerably, leading to a high degree of caution from financial markets and investors. As the tariff issue has developed so recently, there is currently no data covering the post-disruption period. We expect to see more volatile prices for globally traded products. Only around 15% of UK construction products are exported, but the US is the second-largest export market after the Republic of Ireland. For products exported to the US, such as steel and aluminium, the tariffs may have a significant impact.

It is possible that higher US tariffs on Chinese imports may reduce US demand for those products and skew supply to places with lower tariffs, such as the EU, which could ease price inflation for certain goods. 

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