Construction Industry Set for Strong Growth from 2025
The construction sector is on track for a significant upswing starting in 2025, according to leading industry analyst Glenigan.
Glenigan predicts the industry will expand by 8% in 2025 and 10% in 2026, driven by stabilised project starts following the July general election and a strengthening UK economy.
The company’s latest two-year forecast highlights “recovery and renewal” as key themes. Encouragingly, private sector activity has been steadily rising since Q2 2024, with main contract awards up 7% compared to 2023.
What’s Driving Growth?
Glenigan’s economic director, Allan Wilen, attributes the surge to improved consumer confidence, increased household spending, and strategic fiscal measures from the recent budget. These factors are expected to boost sectors like private housing, retail, and hospitality.
Adjustments to fiscal rules enabling higher capital investment are also set to unlock major public sector and infrastructure projects, offering a much-needed lift to government-funded initiatives over the next two years.
Private Housing: A Key Player
After a challenging year, the private housing market stabilised in late 2024 and is projected to grow by 13% in 2025 and 15% in 2026. Glenigan forecasts private housing project starts to rise from £26.8 billion in 2024 to £30.2 billion in 2025, and £34.7 billion in 2026.
Government planning reforms and an improving economic outlook are expected to support this growth, encouraging buyers to take advantage of affordable house prices.
Social Housing and Affordable Homes
Social housing starts, while growing more modestly, are predicted to increase from £7.5 billion in 2024 to £8.4 billion in 2025 and £9.2 billion in 2026—an 11% annual increase.
Government initiatives, such as an extra £500 million for the Affordable Homes Programme and new rules allowing councils to reinvest right-to-buy proceeds, are expected to drive further activity in the sector.
Student Accommodation and Industrial Sectors
After a tough 2024, with student accommodation starts down 15%, this sector is poised for a turnaround in 2025. Easing interest rates and rising demand for purpose-built developments are expected to drive recovery as private landlords exit the buy-to-let market.
The industrial sector, which saw a steep decline of 30% in 2023 and a further 6% in 2024, is forecasted to grow by 5% in 2025 and 8% in 2026. This growth will likely be fuelled by increased demand for facilities supporting online retail.
Hospitality and Office Growth on the Horizon
Hospitality starts, which declined sharply in 2023 and 2024, are set to stabilise in 2025 with modest growth (1%) before rebounding more strongly in 2026 (9%) as household incomes rise.
Office starts, including data centres, are expected to recover from a 21% drop in 2024, with growth of 18% in 2025 and a further 4% in 2026. Investment in data infrastructure (£6.3 billion announced by the government) and the ongoing evolution of hybrid working are key drivers.
Looking Ahead
The construction industry appears well-positioned for a period of sustained recovery and growth, supported by strategic investments, a recovering economy, and strong demand across key sectors. With major infrastructure, housing, and commercial projects in the pipeline, the sector is poised for a robust comeback over the next two years.
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