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The Construction Products Association’s Autumn Forecasts have been released, reflecting the impact of a slow summer and the expectation of tax rises being announced next month.

Total construction output is now only forecast to grow by 1.1% in 2025 and 2.8% in 2026, which is a significant downward revision from the 1.9% in 2025 and 3.7% in 2026 in the previous forecast three months ago.

Firms from across the construction supply chain are reporting that activity has slowed since the spring, particularly in private housing, infrastructure roads, and commercial new build offices. Confidence among homebuyers, homeowners, and investors is weak. This has been exacerbated by uncertainty over the autumn budget next month and who will bear the brunt of the inevitable tax increases and potential spending cuts.

The Construction Products Association (CPA) said that it had taken account of the pre-budget uncertainty in its latest forecasts but, like any economic forecaster, is not be able to take account of the tax rises and spending cuts until they are confirmed on 26^th November.

In private housing, the largest sector of construction, output is forecast to rise by 2.0% in 2025 and 4.0% in 2026, a revision down from the previous forecast of 4.0% in 2025 and 7.0% in 2026. After large falls in demand between 2022 and 2024, house-builders continue to highlight that demand and affordability remain the biggest challenges in areas of the country where house prices are higher, even as interest and mortgage rates have fallen. Conversely, in parts of the country in which house prices are more affordable, site viability is a key problem due to the long list of additional costs that government continues to add to house building. In addition, high-rise developers continue to suffer from delays at Gateways 2 and 3, both for new build and changes in use from commercial developments to residential flats.

In private housing repair, maintenance and improvement (RMI), despite sustained real wage growth, many households have continued to save rather than spend. Some energy-efficiency retrofits, such as heat pumps and solar photovoltaics, subsidised by government, and essential fire safety remediation work, continue to be relatively strong niches within the sector but overall, private housing RMI output is expected to now remain flat in 2025 and only rise by 2.0% in 2026.

In infrastructure, output is expected to rise by 1.9% in 2025 and 4.4% in 2026. However, there is a large variation in fortunes across the sector. Water & sewerage, as well as energy generation and distribution, are set to become key drivers of growth next year as activity ramps up under record investment plans, the CPA said. By contrast, road spending is expected to decline over the next few years as the next Road Investment Strategy period, RIS3, is not only delayed but headline funding has been cut compared to the previous RIS2. In rail, there are rising concerns regarding whether the government’s HS2 reset may lead to further delays, while question marks continue over when major projects such as Euston station will start given the intention for it to be privately financed, the CPA said.

Rebecca Larkin, head of construction research at the CPA, 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 in November have only intensified and this is likely to leave households and businesses holding off spending and investment for longer, and limit demand in the largest construction sectors.

“The effects of pre-budget uncertainty are being felt now but the impact of the budget tax rises will be felt most strongly as we head into 2026. Currently, the forecast is for 2.8% growth in construction output next year, primarily driven by public sector construction, infrastructure and house building. However, the extent of the government’s tax rises and spending cuts, and who bears the brunt of them, will heavily determine whether 2026 is a year of growth or contraction for the industry.”

Summary:

Construction output to rise by 1.1% in 2025 and 2.8% in 2026

Private housing output to rise by 2.0% in 2025 and 4.0% in 2026

Private housing repair, maintenance and improvement to be flat in 2025 and rise by 2.0% in 2026

Infrastructure output to rise by 2.6% in 2025 and 3.9% in 2026

Industrial output to rise by 4.1% in 2025 and 2.6% in 2026

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