Construction recovery continues despite rocky start to 2026, says Glenigan – Mortgage Strategy
The UK construction industry is expected to resume strong growth over the next two years despite a turbulent start to 2026, according to the latest forecast from Glenigan.
Published today, Glenigan’s Summer 2026 Construction Forecast predicts that construction activity will increase by 13% between 2026 and 2028, driven by improving economic conditions, increased public sector investment and renewed confidence among developers and buyers.
The report, which focuses on project start-ups under £100 million, paints a picture of an industry facing major economic and geopolitical disruptions before returning to growth from next year.
Construction activity is forecast to decline by 1% overall in 2026, reflecting the impact of market uncertainty and delayed investment decisions.
However, Glenigan expects employment to grow by 11% in 2027, followed by a further increase of 4% in 2028, which would make the sector 13% above 2025 levels.
The forecast comes after a series of domestic and international events that have disrupted global markets and created challenging conditions across the UK industry.
Glenigan’s previous forecast was for a relatively stable year. But despite the difficult situation, the company believes that the economic environment remains strong enough to support a broader recovery.
“It has been a tumultuous few months for the UK construction sector, with investors and developers reassessing and rescheduling planned projects,” said Allan Wilen, Glenigan’s director of economics.
“However, the economic outlook is expected to improve once the fog of the current war clears, supporting the strengthening of construction activity from 2027 with increases in almost all private and public sectors.”
He added: “As our forecast shows, there are very exciting growth areas as government funding is released and investor appetite begins to return to the market.
Among the sectors of the private sector that are operating strongly are expected to be the construction of factories and offices.
Industrial construction is forecast to decline by 9% this year before rebounding to 16% in 2027 and a further 5% in 2028.
Glenigan says the recovery is accompanied by improving market conditions, strong demand for transport space and support from government programs and infrastructure policies.
Office construction proved to be one of the dominant players in the sector during the difficult first half of 2026.
Work is expected to increase by 21% by the end of this year, due to the demand for sustainable, energy-efficient office space and the growing needs of data centers linked to the rapid expansion of artificial intelligence technology.
After two years of rapid growth, office employment is expected to decline by 11% in 2027 before returning to 4% growth in 2028.
Public sector construction is also expected to strengthen significantly over the forecast period, supported by large government investment programs.
Educational construction is expected to grow by 8% in 2026, followed by a 20% increase in 2027 and a further increase of 5% in 2028. School rebuilding and renovation projects are expected to dominate the work as funding pipelines become clearer and investment is released to address aging facilities.
The health sector is similarly forecast to recover strongly, with employment rising 9% this year and again in 2027 before accelerating to 14% growth in 2028.
Capital increases, the release of deferred projects and investment in modernisation, diagnostic centers and community care facilities are expected to drive work across all areas of the NHS.
Civil engineering is expected to remain flat in 2026 after a prolonged decline, before recording a 15% increase in 2027.
The sector is expected to benefit from major investment programs across water, energy and transport infrastructure.
Water companies are increasing investment following Offwat’s approval of £104 billion in upgrades and improvements between 2025 and 2030. Continued investment in renewable energy, electricity networks, offshore wind projects and nuclear projects, including Hinkley Point C and Sizewell C, are also expected to underpin growth.
Meanwhile, spending on road improvements, rail upgrades, HS2 and the TransPennine Route is expected to boost transport infrastructure activity from next year.
After a disappointing start to the year, both private and social housing are forecast to end 2026 in decline, with private housing construction down 5% and social housing down 3%.
However, Glenigan expects significant changes from 2027.
Private house construction is forecast to increase by 13% in 2027 and increase by 5% in 2028, supported by lower borrowing costs, improving consumer confidence and planning changes designed to increase site availability.
Public housing activity is expected to grow by 8% in 2027 and 4% in 2028. Government funding increases, changes to the Social Housing Rent Cap and accelerated approvals from the Building Safety Regulator are expected to support delivery, particularly in high-end residential developments.
Retail and tourist developments are expected to benefit from the gradual improvement in consumer confidence.
Sales activity is forecast to increase by 1% this year before accelerating to 10% growth in 2027. Employment is expected to moderate, falling by 4% in 2028.
Glenigan believes that strong economic conditions will encourage new retail developments, with supermarkets continuing to account for the largest share of activity.
The hotel and leisure industry is facing a changing landscape. Employment is forecast to decline by 12% in 2026 before rebounding to 11% in 2027 and a 1% decline in 2028.
The sector has been affected by rising operating costs, geopolitical instability and reduced consumer spending. However, improved economic conditions and the introduction of permanently low business rates for retail, tourism and leisure businesses are expected to support investment and open up new development opportunities.
