The summer outlook is more pessimistic than the spring forecast, with total construction output now predicted to drop 3.3% in 2026, compared with a 2.5% drop forecast in spring. Forecast growth of 1.2% in 2027 is unchanged but from a lower base. This deterioration reflects weaker-than-expected activity in the first half of 2026, alongside increasing construction product, energy and financing costs.

The main downward revisions are in housing, commercial and industrial. Commercial output is now forecast to fall 4.9% in 2026, compared with a 3.7% fall previously, while industrial has been dramatically revised from a 2.4% rise to a 3.3% fall. Infrastructure remains relatively resilient, with the forecast of a 3.2% rise unchanged for 2026, although 2027 has been marginally reduced from a 3.4% to a 3.2% rise. 

The underlying message is that inflation may preserve the cash value of construction while reducing the physical volume delivered, particularly for infrastructure and other large, materials-intensive projects. 

Following the weather-affected Q1, activity between March and June was a considerable improvement; however, concerns remain over the impacts of the Middle East conflict. Rising oil, energy, commodity and construction-product prices are expected to feed through into construction costs, alongside higher financing costs, leading to investor uncertainty about committing to new projects. Further tax rises or public spending cuts in the 2026 or 2027 Budgets are also a risk; the government’s 50% tariff on imported steel products since 1 July is likely to increase costs too. 

Construction-specific constraints include continuing contractor insolvencies, Building Safety Regulator delays, skill shortages and concerns about the reliability of ONS construction data used for CPA forecasts.

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