UK construction should return to growth in 2027, but not evenly. The forecasts describe a split market, with regulated infrastructure, energy, water and some public programmes moving ahead while private housing and parts of commercial construction stay held back by finance costs, viability and weak demand.
The Construction Products Association's Summer 2026 forecast has total output falling by 3.3% this year and rising by 1.2% in 2027. BCIS is slightly more upbeat, expecting total new-work output to grow by 2.2% next year after a 3.7% fall in 2026, and CITB forecasts total construction output growth of 1.8% in 2027 and 2.8% in 2028.
Construction and refurbishment activity near Oxford Street in central London as the industry looks towards a selective recovery in 2027. Photo: London Construction Magazine.
KEY TAKEAWAY: Expect a selective recovery in 2027 rather than a boom. Infrastructure has the strongest output forecast, while education, industrial, civil engineering and health show some of the fastest projected growth in new project starts.
Construction Is Entering 2027 From a Weak Base
The industry is still shrinking as it heads towards 2027. Output fell by 0.2% in August 2026, the fourth monthly decline in a row, according to the latest Office for National Statistics data. Over the three months to August, total output was down 1.0%, with new work down 1.4% and repair and maintenance down 0.3%, and private new housing, which fell by 3.2%, was the biggest single drag.
Forward work is thin as well. New orders fell by 11.8% in the second quarter of 2026 compared with the first, with large falls in private commercial and public non-housing work, and the UK Construction PMI was still below the 50 no-change mark in September at 46.1, so contractors were still reporting falling activity as the final quarter began. Against that background, 1.2% growth in 2027 represents a recovery from a much lower base after two difficult years, not a return to boom conditions.
Why the 2027 Forecasts Look So Different
At first glance the main forecasts disagree sharply, but most of the gap comes down to what each one measures. CPA forecasts the volume of work actually delivered on site and BCIS forecasts new-work output, while CITB's figures sit within its workforce modelling. Glenigan measures the value of underlying project starts below £100m, which is a leading indicator of work to come rather than a measure of current output.
| Forecast | 2026 | 2027 | Measure |
|---|---|---|---|
| CPA | -3.3% | +1.2% | Total construction output |
| CITB | -0.2% | +1.8% | Construction output |
| BCIS | -3.7% | +2.2% | Total new-work output |
| Glenigan | -1% | +11% | Underlying project starts |
Glenigan's 11% therefore does not mean output will jump by 11% next year. Its 2026–28 forecast expects substantially more projects to start in 2027, and those schemes then feed into output over the following months and years as they mobilise.
Infrastructure Is the Strongest Output Market
No other sector combines forecast growth, committed capital and long programmes as clearly as infrastructure. CPA expects infrastructure output to rise by 3.2% in both 2026 and 2027, while BCIS forecasts infrastructure new-work output to swing from a 1.4% contraction this year to 2.9% growth next year.
Electricity transmission has become a construction market in its own right. National Grid's RIIO-T3 plan allows for up to £35bn of investment between April 2026 and March 2031, covering network reinforcement, new substations and Accelerated Strategic Transmission Investment projects. Water offers a similarly visible workload, with Ofwat's PR24 settlement supporting around £104bn of spending over the 2025–30 AMP8 period, including a major increase in new infrastructure investment.
LCM's separate UK Construction Investment 2027 analysis found the same concentration of capital in electricity networks, water, nuclear, defence and other long-duration programmes. What sets these markets apart is that regulated funding or strategic need sits behind them, so they depend far less on a developer deciding whether a speculative building still stacks up at today's borrowing costs.
Education, Industrial and Civil Engineering Lead New Starts
Rank the sectors by projects expected to start, rather than work already on site, and the order changes. Glenigan forecasts underlying education starts to rise by 20% in 2027 to a value approaching £7bn, with industrial up 16% and civil engineering up 15%. Private housing starts are projected to rebound by 13%, hotel and leisure by 11%, retail by 10%, health by 9% and social housing by 8%.
| Sector | 2027 indicator | What is driving it |
|---|---|---|
| Infrastructure | CPA output +3.2% | Grid, energy and water |
| Education | Glenigan starts +20% | School Rebuilding Programme, condition and RAAC work |
| Industrial | Glenigan starts +16% | Logistics, manufacturing and distribution |
| Civil engineering | Glenigan starts +15% | Utilities, water and energy networks |
| Health | Glenigan starts +9% | New hospitals and NHS estate investment |
There is real programme money behind the education figure. The Government has committed almost £20bn to the School Rebuilding Programme through to 2034–35, with more than 500 schools already included and a further 250 due to be selected by early 2027. Health is moving towards a programme model too, with the Hospital 2.0 Alliance mobilised to support the New Hospital Programme.
Data Centres Could Grow Fast, Where Power Exists
Data centres are among the strongest opportunities in the building sector, and also a good example of why pipeline values need reading with care. LCM's review of the UK data-centre pipeline identified more than £100bn of proposed schemes at various planning stages, including £12.7bn of projects with detailed permission that had not yet started on site.
Increasingly, the constraint is electricity rather than investor appetite. LCM's later analysis of grid power as the critical path for UK data centres found only 242MW of capacity physically under construction, set against a far larger committed and early-stage pipeline, so a consented AI campus cannot be counted as 2027 workload until its power, procurement and delivery arrangements are well advanced. For M&E contractors, HV specialists, groundworks, structures and commissioning teams, that makes data centres a potentially fast-growing market, but a less predictable driver of national output than regulated grid or water spending.
Housing Is the Biggest Test of a Broader Recovery
Private housing is where optimism needs the most qualification. CPA forecasts a 10% fall in private housing output in 2026 followed by no growth in 2027. Glenigan's 13% forecast for underlying housing starts is far more positive, but that rise would come from a depressed base and relies on developers turning better market conditions into actual site starts.
Borrowing costs remain a hurdle. The Bank of England held Bank Rate at 3.75% in September, with three Monetary Policy Committee members voting for an increase, while development viability is also being squeezed by construction costs, planning delays, infrastructure requirements and additional regulatory costs.
London is especially exposed to the gap between permission and construction. LCM's analysis of why London housing schemes are stalling found that consent is increasingly only the start of a longer pre-construction process covering viability, Building Safety requirements, funding, utilities, procurement and design certainty.
Affordable housing has a firmer long-term funding signal in the £39bn Social and Affordable Homes Programme for 2026–36, although that money still has to turn into land, permissions, procurement and construction before it shows up in output.
The Recovery Could Run Into a Capacity Problem
A stronger pipeline will also test whether the industry has the people to deliver it. CITB estimates that construction needs an average of 41,200 additional workers a year between 2026 and 2030, and grid, water, nuclear, data centres and defence are all competing for many of the same civil engineering, electrical, M&E, project-controls and specialist skills.
The supply chain is still under financial strain as well. Insolvency Service data recorded 3,873 construction company insolvencies in the 12 months to September 2026, equivalent to 17% of the cases where the industry was captured. That is not an insolvency rate for construction businesses, but it shows how much stress the sector is carrying into the recovery.
For contractors and suppliers, the sector with the highest forecast percentage is unlikely to be the best guide to 2027. Executable work will come mainly from markets where funding, consent, utilities, procurement and client commitment are already in place, and on current evidence that points to electricity infrastructure, water, education, health, industrial and logistics, and data centres that have secured power.
Frequently Asked Questions
Will UK construction grow in 2027?
The major forecasts expect growth to return, although the figures vary with what each one measures. CPA forecasts total output growth of 1.2% and CITB 1.8%, while BCIS forecasts 2.2% growth in total new-work output.
The major forecasts expect growth to return, although the figures vary with what each one measures. CPA forecasts total output growth of 1.2% and CITB 1.8%, while BCIS forecasts 2.2% growth in total new-work output.
What is likely to be the fastest-growing construction sector in 2027?
Infrastructure has the clearest output-growth forecast, led by electricity networks, energy and water. For new project starts, Glenigan currently forecasts education at +20%, industrial at +16% and civil engineering at +15%.
Infrastructure has the clearest output-growth forecast, led by electricity networks, energy and water. For new project starts, Glenigan currently forecasts education at +20%, industrial at +16% and civil engineering at +15%.
Will housebuilding recover in 2027?
Starts may pick up, but CPA expects private housing output to stay flat after a 10% fall in 2026, with finance, viability, planning and regulatory delivery all still holding the market back.
Starts may pick up, but CPA expects private housing output to stay flat after a 10% fall in 2026, with finance, viability, planning and regulatory delivery all still holding the market back.
The next hard-data test comes on 12 November 2026, when the ONS publishes third-quarter construction new orders, which will show whether the 11.8% fall in orders recorded in the second quarter has started to reverse.
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