Construction intelligence monitor Glenigan has given its forecast for 2025 to 2027 – and it predicts the sector will experience a much-needed resurgence.
Glenigan says that with growth predicted for 2025 (+3%), 2026 (+10%) and 2027 (+11%), these positive figures, spurred on by greater consumer and business confidence, will be welcomed following a disappointingly stagnant second half of 2024.
Residential: Housing Market Set for Growth
The monitor says the outlook for housebuilding is extremely positive.
Private housing starts have already shown marked improvement during the first four months of 2025, bolstered by more favourable market conditions. While a brief retrenchment is anticipated in Q2, this is expected to be temporary.
Encouragingly, the housing market is forecast to strengthen considerably during the latter half of 2025 and throughout 2026, driven by rising household incomes, reduced mortgage rates and improving economic conditions.
The chief catalyst for growth in this vertical registered at the start of the year, with the stamp duty increases (introduced in April) providing significant momentum to Q1 housing market activity as purchasers expedited completions ahead of the tax rise.
The sector’s growth trajectory is expected to continue as consumer confidence strengthens in response to increasing real incomes and further interest rate reductions.
Additionally, forthcoming planning reforms are projected to release additional development sites, providing further support to sector growth in the later stages of the forecast period.
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Private Non-Residential Verticals: A slow, yet steady, recovery
The Forecast presents a mixed bag across non-residential verticals, which have experienced a more measured recovery.
The industrial construction sector is one of the stronger performers, projected to resume growth from 2025, primarily driven by increasing demand for logistics space as rising consumer spending boosts requirements from online retailers and third-party carriers.
Meanwhile, retail construction faces a more gradual recovery path, with near-term challenges from National Insurance increases and minimum wage rises creating cost pressures for retailers.
While an excess of vacant retail premises will likely constrain new developments, opportunities exist in repurposing existing spaces into mixed-use locations, with discount supermarkets Aldi and Lidl remaining notable expansion bright spots.
Hotel and leisure construction, which rebounded in 2024, faces similar labour cost challenges to retail. However, improving household finances are expected to increase discretionary consumer spending, strengthening investor confidence and driving sector growth through 2026-2027.
The office sector is forecast to return to growth as financing conditions improve.
This follows a 16% decline in starts last year, amid higher borrowing costs and surplus floorspace. This has been prompted by increasing office refurbishment work, as premises are remodelled for hybrid working.
Likewise, environmental performance requirements will generate demand for retrofit and new build projects throughout the forecast period.
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Public Sector Verticals: Renewed Growth Across Key Areas
Following initial disruption from the general election and subsequent capital programme reviews, public sector construction is now positioned for sustained growth.
Recent Budget commitments and the Spring Statement have established both near-term funding support and a longer-term investment framework through 2026-2027.
Education construction has demonstrated particular strength, with school building projects surging 41% in 2023 and continuing to grow through 2024, bolstered by increased Department of Education capital funding and RAAC remediation programmes.
The current financial year anticipates 100 new school rebuilding projects alongside additional further education investments, though university construction faces constraints from financial pressures.
Healthcare construction has recovered from 2023 disruptions, with increased NHS capital funding for 2025/26 targeting RAAC issues and estate repair backlogs alongside technology investments.
The Spending Review’s longer-term funding commitments are expected to drive renewed growth in 2026-2027.
Social housing development has benefited from greater cost stability and increased government funding, with further growth anticipated from mid-2025.
On the civils front, a raft of infrastructure projects are forecast for sustained growth over the next three years, supported by increased funding for road repairs and longer-term investment in transportation networks.
The utilities sector shows particular promise, with water industry investment nearly doubling to £104 billion over five years for pollution reduction and infrastructure improvements, while renewable energy and grid enhancement projects advance under net-zero policies.
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