UK construction starts fell in July, according to the latest Glenigan construction index, with a recovery in H2 looking more unlikely.

Glenigan said its July index shows a sector stuck with weak economic growth and geopolitical uncertainty.

Residential starts fell by 31% in Q2, Glenigan found, with project values slashed in half compared to 2025 levels.

Private housing was the main driver of this decline, with the ongoing stagnation likely due to high – if currently held – interest rates, denting buyer appetite.

Rising labour and material costs are making developers hesitant to commit shovels to ground until the market stabilises.

Starts dropped 40% compared with the preceding three months, finishing 63% lower than a year ago.

Less severely, social housing also contracted, with rising materials costs and a backlog of delayed projects hampering progress. This led to starts falling 11% against the preceding three months and declining 18% year-on-year.

The Glenigan index said: “With continued instability abroad and a government in transition at home, there seems little sign of immediate relief.

“The knock-on effects are being acutely felt across almost every residential and non-residential vertical, where rocketing prices, finite resources and a barely dripping investment tap have caused a general sense of malaise, leading to inevitable stagnation.”

Glenigan economic director Allan Wilen says: “In another perfect storm for the UK construction sector, a sharp decline in residential projects led the sector decline during the second quarter.

“This drop reflects the impact of the Iran War on consumer confidence, with developers adjusting their development programmes in response to a slowing housing market.

“Whilst this year will end in negative numbers, our forecasting predicts that we will see a return to growth next year as economic conditions improve, alongside an easing in inflationary pressures and interest rates, and as funding from the Spending Review grows.

So, whilst the current picture is unclear, we should expect to see, at least, some bottoming out and revival in Q4, heralding a larger uptick in 2027.”