The UK construction industry is expected to rebound strongly 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, rising public sector investment and renewed confidence among developers and consumers.
The report, which focuses primarily on underlying project starts valued below £100 million, paints a picture of an industry weathering significant economic and geopolitical disruption 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 activity to surge by 11% in 2027, followed by a further 4% increase in 2028, taking the sector 13% above 2025 levels.
The forecast comes against the backdrop of a series of domestic and international events that have unsettled global markets and created challenging conditions across UK industry.
Glenigan’s previous forecast anticipated a relatively stable year. But despite the difficult environment, the company believes the economic outlook remains resilient enough to support a broad-based recovery.
“It’s been a turbulent few months for the UK construction sector, with investors and developers reassessing and rescheduling planned projects,” said Allan Wilen, economics director at Glenigan.
“However, the economic outlook is expected to improve once the current fog of war dissipates, supporting a strengthening in construction activity from 2027 with an uplift across almost all private and public sector verticals.”
He added: “As our forecast shows, there are some particularly exciting growth areas as government funding is released and investor appetite starts to return to the market. Contractors will need to be quick off the mark as more favourable conditions are finally felt.”
Among the strongest-performing private sector segments are expected to be industrial and office construction.
Industrial construction is forecast to decline by 9% this year before rebounding sharply with growth of 16% in 2027 and a further 5% in 2028.
Glenigan attributes the recovery to improving market conditions, strong demand for logistics space and support from government planning and infrastructure policies.
Office construction has proved one of the sector’s standout performers during a difficult first half of 2026.
Activity is expected to rise by 21% by the end of this year, driven by demand for sustainable, energy-efficient office space and increasing requirements for data centres linked to the rapid expansion of artificial intelligence technologies.
Following two years of rapid growth, office activity is expected to ease by 11% in 2027 before returning to growth of 4% in 2028.
Public sector construction is also expected to strengthen significantly over the forecast period, supported by major government investment programmes.
Education construction is forecast to grow by 8% in 2026, followed by a substantial 20% increase in 2027 and a further 5% rise in 2028. School rebuilding and refurbishment projects are expected to dominate activity as funding pipelines become clearer and investment is released to address ageing estate stock.
The health sector is similarly forecast to recover strongly, with activity rising by 9% this year and again in 2027 before accelerating to 14% growth in 2028.
Increased capital funding, the release of previously deferred projects and investment in modernisation, diagnostic centres and community care facilities are expected to drive activity across NHS estates.
Civil engineering is forecast to remain flat during 2026 after a prolonged downturn, before recording a 15% increase in 2027.
The sector is expected to benefit from major investment programmes across water, energy and transport infrastructure.
Water companies are ramping up investment following Ofwat’s approval of £104 billion in upgrades and repairs between 2025 and 2030. Continued investment in renewable energy, electricity networks, offshore wind and nuclear projects, including Hinkley Point C and Sizewell C, is also expected to underpin growth.
Meanwhile, spending on road maintenance, rail upgrades, HS2 and the TransPennine Route is expected to strengthen 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 housebuilding down 5% and social housing down 3%.
However, Glenigan expects a significant turnaround from 2027.
Private housebuilding is forecast to increase by 13% in 2027 and a further 5% in 2028, supported by lower borrowing costs, improving consumer confidence and planning reforms designed to increase site availability.
Social housing activity is projected to grow by 8% in 2027 and 4% in 2028. Increased government funding, reforms to the Social Housing Rent Cap and faster approvals from the Building Safety Regulator are expected to support delivery, particularly for high-rise residential developments.
Retail and hospitality construction are expected to benefit from a gradual improvement in consumer confidence.
Retail activity is forecast to rise by 1% this year before accelerating to 10% growth in 2027. Activity is then expected to moderate, falling by 4% in 2028.
Glenigan believes stronger economic conditions will encourage new retail developments, with supermarkets continuing to account for the largest share of activity.
The hotel and leisure sector faces a more volatile outlook. Activity is forecast to decline by 12% in 2026 before rebounding with 11% growth in 2027 and a slight 1% fall in 2028.
The sector has been affected by rising operating costs, geopolitical instability and subdued consumer spending. However, improving economic conditions and the introduction of permanently lower business rates for retail, hospitality and leisure businesses are expected to support investment and unlock new development opportunities.
