CPA revises growth expectations as economic uncertainty becomes cause for concern
The Construction Products Association (CPA) has downgraded its growth forecasts for the UK construction industry, warning that uncertainty surrounding the government’s upcoming Autumn Budget and potential tax rises is already weighing on demand across key sectors.
Total construction output is now expected to grow by 1.1% in 2025 and 2.8% in 2026, a significant revision from the previous forecast of 1.9% and 3.7% respectively.
Confidence hit across housing and commercial sectors
Firms across the construction supply chain have reported slower activity since spring 2025, particularly in private housing, infrastructure roads, and commercial new build offices. The CPA says confidence among homebuyers, homeowners, and investors has weakened due to uncertainty about where the burden of forthcoming tax rises and spending cuts will fall.
The Association’s forecasts include the effects of pre-Budget caution but cannot factor in the impact of confirmed fiscal measures until the government sets them out on 26 November.
Housing demand remains subdued
Private housing – the largest construction sector – is forecast to rise by 2.0% in 2025 and 4.0% in 2026, down from previous projections of 4.0% and 7.0%.
After sharp demand declines between 2022 and 2024, house builders continue to cite affordability and access to finance as major challenges, particularly in higher-priced regions, despite falling mortgage rates.
In more affordable areas, site viability is a growing concern due to additional regulatory and compliance costs. Developers of high-rise schemes also face delays at Building Safety Gateways 2 and 3, both for new builds and for projects converting offices into residential use.
Home improvement recovery delayed
In the private housing repair, maintenance and improvement (RM&I) sector, homeowners remain cautious despite rising real wages. Many are saving rather than committing to large renovation projects as uncertainty persists over possible tax increases.
The CPA expects a recovery in RM&I activity no earlier than spring 2026, depending on post-Budget confidence levels. The sector is forecast to remain flat in 2025, with only a modest 2.0% rise in 2026.
Energy-efficiency retrofits – such as heat pump and solar panel installations – continue to perform relatively well, supported by government incentives. Fire safety remediation work also remains stable, but these represent small niches within the wider RM&I market.
Infrastructure outlook mixed
Infrastructure output is projected to grow by 1.9% in 2025 and 4.4% in 2026, though performance will vary widely by subsector. Investment in water, sewerage, and energy is expected to drive growth, with new generation and distribution schemes moving forward under record spending plans.
By contrast, road construction faces a slowdown as the next Road Investment Strategy (RIS) is delayed and funding reduced compared with RIS2. In rail, the CPA highlights ongoing concerns around delays following the government’s HS2 “reset”, and uncertainty over private financing for Euston station.
Budget decisions will define 2026 outlook
Rebecca Larkin, CPA Head of Construction Research, said:
“The pickup in construction activity that had been expected at the start of the year has not materialised as uncertainty continues to hold back house purchases, home improvements spending and private sector investment decisions.
The risks and uncertainties around the impact of impending tax rises in the Autumn Budget have only intensified, and this is likely to leave households and businesses holding off spending and investment for longer.”
She added:
“The effects of pre-Budget uncertainty are being felt now, but the impact of tax rises will be felt most strongly as we head into 2026.
Our current forecast for 2.8% growth next year is driven primarily by public sector construction, infrastructure, and house building, but the extent of government fiscal tightening will ultimately determine whether 2026 becomes a year of growth or contraction for the industry.”
Read more from the CPA here: https://www.buildnews.co.uk/rising-risks-cloud-construction-growth-outlook-despite-2025-26-forecast-uplift-says-cpa/
