Rising Risks Cloud Construction Growth Outlook Despite 2025–26 Forecast Uplift, Says CPA

By Danny BallPublished On: July 31st, 2025Categories: Top Stories

The Construction Products Association (CPA) has maintained its cautious forecast for growth in the UK construction sector, with output expected to rise by 1.9% in 2025 and 3.7% in 2026, despite mounting economic risks and policy uncertainty.

Published today (30 July), the CPA Summer Forecasts highlight that while the sector’s three key drivers; private housing new build, repair, maintenance & improvement (rm&i), and infrastructure remain strong, their near-term recovery is vulnerable to broader macroeconomic headwinds, including potential tax rises and public spending cuts in the government’s upcoming Autumn Budget.

Housebuilding Recovery to Be Uneven

Private housing output is forecast to grow 4.0% in 2025 and 7.0% in 2026, though performance will vary significantly across different parts of the market.

“Major house builders continue to see a gradual recovery in completions from a low base,” the CPA notes, while smaller housebuilders face site viability challenges linked to increasing regulatory and compliance costs.

The Build-to-Rent and high-rise housing sectors are likely to remain constrained by ongoing delays estimated at 6–9 months, with the Building Safety Regulator (BSR).

These issues are not expected to ease within the forecast period.

While new policy measures, including reforms to the National Planning Policy Framework and the Planning and Infrastructure Bill, could benefit supply delivery in the longer term, demand-side constraints, notably mortgage affordability and buyer confidence will be more decisive in the near term.

Home Improvement Activity Still Subdued

In private housing rm&i, government-subsidised energy efficiency schemes, such as those for heat pumps and solar PV, alongside fire safety remediation are providing ongoing support. However, broader home improvement activity remains muted due to ongoing economic caution.

“Although many homeowners currently have spare funds available for general home improvements, they are choosing to save rather than spend due to the scarring effect of the inflation spikes in 2022 and 2023,” the CPA explains.

A recovery in discretionary rm&i spending is still expected by late 2025, but this could be delayed into 2026 if further tax rises are introduced.

Private housing rm&i output is forecast to rise by 2.0% in 2025 and 3.0% in 2026, with most of the growth expected towards the end of the period.

Infrastructure Pipeline Faces Delivery Risks

Infrastructure output remains a key pillar of growth, bolstered by ongoing delivery of mega-projects like Hinkley Point C and HS2, as well as planned investment in water, sewerage, and energy networks.

The government’s 10-year infrastructure strategy and Infrastructure Pipeline indicate strong long-term potential, but delays and funding questions continue to undermine delivery.

Despite these risks, the CPA forecasts 1.9% infrastructure growth in 2025, rising to 4.4% in 2026.

Rising Uncertainty Dampens Industry Confidence

Rebecca Larkin, CPA Head of Construction Research, commented:

“The key fundamentals for the construction industry remain largely unchanged. Although everything continues to point towards the gradual growth in construction activity gathering pace over the rest of this year and in 2026, the only thing that has changed is the uncertainty.

“The forecasts envisage demand and activity gradually picking up in the two largest construction sectors but with all the different uncertainties around the economy, the key question for housing new build and rm&i is still, when will mortgage rates fall to allow for more homebuyers, when will existing homeowners feel confident enough to spend on larger home improvements, and when will delays at the BSR ease to allow house builders and developers to start more high-rise projects.”

Larkin warned that looming fiscal pressures could undermine current momentum:

“The government’s focus on capital investment in the Spending Review, plus the ten-year infrastructure strategy and infrastructure pipeline have helped to plot a path to long-term growth, but it is looking increasingly likely that the Chancellor will need to either raise taxes or cut capital expenditure , or do both in the Autumn Budget.

“This would directly affect the largest private construction sectors, such as private housing new build and rm&i, as well as the largest public construction sectors, including schools, hospitals, and infrastructure, depending on where the capital expenditure cuts may fall.”

The CPA’s Summer Forecasts underscore the fragile optimism shaping UK construction’s recovery trajectory—dependent as much on consumer sentiment and housing demand as it is on fiscal policy and public infrastructure funding.