The project-tracking expert estimates that construction will grow by 8 per cent in 2025, and by 10 per cent in 2026.
The number of construction starts, which had been dropping but has stabilised since the July general election, will ‘continue to strengthen’ as the UK economy regains momentum in 2025-26, Glenigan said.
The company said recovery and renewal was the key takeaway from its two-year industry forecast, published this week.
Encouragingly, Glenigan found that private sector work in the construction industry had gradually risen throughout the second quarter of 2024, and a promising project pipeline showed main contract awards were 7 per cent up on 2023 figures.
Glenigan’s economic director Allan Wilen said the growth was being ‘fuelled by a combination of improved consumer confidence, increased household spending, and strategic fiscal changes announced in the recent budget’, which in turn will ‘drive activity in consumer-related verticals such as private housing, retail, and hotel and leisure’.
He added that the budget’s adjustments to fiscal rules, allowing for higher levels of capital investment, would ‘unlock significant public sector and infrastructure projects, providing a much-needed boost to government-funded initiatives over the next two years’.
After being on a downward trajectory for most of the year, activity in the private housing market has stabilised in the second half of 2024, and could see a 13 per cent growth in 2025 with a further 15 per cent growth in 2026, according to Glenigan’s analysis.
The company says government planning reforms are anticipated to reverse the downward trend and pave the way for an uptick in housing approvals, while improvements in household incomes as the economy grows ‘may prompt buyers to take advantage of reasonable house prices’.
The total value of project starts on private housing schemes, which amounted to £28.1 billion in 2023 and £26.8 billion in 2024, could total £30.2 billion in 2025, and £34.7 billion by 2026, according to Glenigan.
The total value of project starts on social housing schemes is set to see slightly less growth, from £8.9 billion and £7.5 billion in 2023 and 2024 respectively, to £8.4 billion and £9.2 billion in 2025 and 2026 (11 per cent year-on-year growth from 2024).
However, new government policies are anticipated to increase development activity over the next two years, including an extra £500 million funding for the Affordable Homes Programme.
A government shake-up on right-to-buy rules will enable local authorities to retain the full value of council houses sold, which they can then use to fund new social housing.
And student accommodation, which has had a poor year with a 15 per cent fall in project starts compared to 2023, is likely to see a ‘reversal of fortunes’ and an expansion driven by easing interest rates and rising demand for purpose-built developments as buy-to-let investors leave the market.
Industrial starts, which saw a strong rebound post-pandemic but plummeted sharply in 2023 (down 30 per cent) and weakened further in 2024 (down 6 per cent), are predicted to grow by 5 per cent in 2025 and 8 per cent in 2026, fuelled by a renewed demand for premises to support online retail.
Hospitality project starts, which fell by 13 per cent in 2023 and a further 14 per cent in 2024, are set to grow slightly in 2025 (1 per cent), and see strong growth in 2026 (9 per cent) in line with household incomes.
And office starts, which fell by 14 per cent in 2023 and by nearly a quarter (21 per cent) in 2024, are set to grow by 18 per cent in 2025, and by a further 4 per cent in 2026.
The sector, which includes data centres, is expected to benefit from a rise in refurbishment and extension projects over the next two years, as hybrid working remains an important driver for landlords and occupiers to accommodate changing working patterns.
It is also set to be boosted by £6.3 billion of investment in data infrastructure announced by the government in October, with demand for data centres expected to keep rising in line with the rapid advancement of AI.
