Government Spending Plans 2026 - What They Mean for Construction

As the UK heads into 2026, the Government has laid out ambitious spending plans under its 2025 Spending Review (SR25) that carry significant implications for the construction sector. With large capital investment flows, a renewed focus on housing, infrastructure and green energy, along with rising demands on skills, procurement and regulatory reform, 2026 may be a watershed year. Here’s what construction companies, developers, contractors and investors need to know.

Key Headlines from SR25 & Related Spending Documents

Capital DEL and Total Public Investment Up

• The Main Estimates for 2025/26 show Capital DEL (Departmental Expenditure Limits for capital spending) rising from ~£114.6 billion in 2024/25 to ~£129.5 billion in 2025/26 — a jump of ~13%. 
• Over the SR25 period, the government has committed an additional £120 billion over earlier plans (from Spring Budget 2024) for capital investment to 2029-30. 

Housing & Affordable Homes

• £39 billion pledged over the next 10 years to the new Affordable Homes Programme to support construction of social and affordable housing. 
• The “Housing Bank” concept (Homes England being enabled to offer cheaper financing etc.) is being explored to help developers, particularly on larger-scale and affordable housing. 

Energy, Net Zero, Decarbonisation Measures

• Significant funding for clean power: e.g. £14.2 billion for Sizewell C nuclear power plant. 
• Additional spending earmarked for small modular reactors (SMRs), nuclear fusion, and Carbon Capture and Storage (CCS) projects such as Acorn (Scotland) and Viking (Humberside). 
• The Government’s Warm Homes Plan gets full allocation (~£13.2 billion) to improve energy efficiency in homes: insulation, heat pumps, solar etc. 

Transport, Infrastructure & Resilience

• Massive transport investment: city region transport, upgrades to lines (TransPennine Route, East-West Rail etc.) are being pushed. 
• Flood defences commitment: about £4.2 billion over three years for flood defence works in England. 
• The Government has signaled a 10-year infrastructure strategy, with “Transport for City Regions” (TCR) settlements totalling ~£15.6 billion through to 2031-32. 

Skills & The Construction Workforce

• A Construction Skills Fund of £625 million has been confirmed, aiming to train ~60,000 skilled construction workers by the end of this Parliament. 
• Concern remains in the sector about whether skills, supply chain capacity, and planning delays can keep pace with elevated investment.

Critical Unknowns & What to Watch in 2026

Delivery vs Announcements Many announcements are large headline figures; whether funds reach ground level and translate into shovel-ready projects remains uncertain. Monitoring project pipelines and approvals key.

Planning & Permitting Reforms The government has sign-posted planning and infrastructure reforms; how quickly these are implemented will affect how fast construction projects can start.

Regulatory & Standards Pressure As Net Zero agendas tighten, standards for energy efficiency, building codes etc will become more demanding, raising build cost, but also potential quality and innovation rewards.

Skills & Labour Supply Training fund is helpful, but the scale of the skills required (electricians, clean energy installers, specialist roles for nuclear etc) is vast. Retaining talent and raising productivity will be critical.

Cost Inflation & Material Supply Any disruption (global supply chains, energy prices, geopolitical risk) could erode margins or delay projects.

For the construction sector, the government’s 2025-26 & onward spending plans represent a strong tailwind: elevated public capital investment, particularly for housing, infrastructure and clean energy; increased certainty in several major programmes; and financial tools intended to leverage private sector participation.

However, the path from budget line to concrete, steel and brick is not guaranteed. The biggest differentiators will be speed and efficiency of regulation/planning, the ability to scale up skilled labour and managing costs. Companies that can combine technical capability, sustainability credentials and readiness to partner (public/private) are likely to benefit the most.