12th November 2026
Britain's construction industry is showing signs of improvement in some areas, but the latest figures from the Office for National Statistics (ONS) reveal an industry still struggling to regain momentum.
Construction output increased in September, bringing some welcome relief after four consecutive monthly falls. However, looking at the wider third-quarter figures, the picture remains concerning. Private housebuilding continues to struggle, new construction work has declined and building costs are rising again.
The figures matter well beyond the construction industry itself. Building activity supports thousands of businesses, provides employment across the country and plays an important part in delivering the homes, schools, hospitals, roads and infrastructure needed for economic growth.
A difficult quarter for construction
Total construction output fell by 0.7% in the three months from July to September 2026 compared with the previous quarter.
The decline was particularly noticeable in new construction work, which fell by 1.6%. Repair and maintenance performed rather better, increasing by 0.5%.
Private new housebuilding was the biggest contributor to the quarterly decline, with output falling by 4.7%.
This is an important distinction. Maintaining existing buildings is providing some support to the industry, but the construction of new buildings, particularly private housing, remains under pressure.
For an economy facing a shortage of affordable housing and difficulties providing accommodation for younger households, this is hardly encouraging.
September provides a little optimism
There was better news in the monthly figures.
Construction output increased by 0.8% in September, with new work rising by 0.9% and repair and maintenance increasing by 0.6%.
Infrastructure was particularly strong, with new infrastructure work increasing by 3.3%.
This is significant because major infrastructure programmes, including energy developments, transport improvements and other public investment, can provide substantial workloads for construction companies.
However, it would be premature to describe September as the beginning of a sustained recovery. One month's improvement needs to be followed by further growth before confidence can return.
New orders offer some encouragement
One of the more interesting parts of the ONS report concerns new construction orders.
These increased by 1.2%, equivalent to £107 million, during the third quarter.
New orders are important because they provide an indication of the work that construction companies can expect to undertake in the months ahead.
The increase was mainly attributable to public-sector other new work and private commercial developments.
Nevertheless, there is some important background to consider. New orders fell by 11.8%, or £1.232 billion, in the second quarter.
The latest increase therefore represents only a modest recovery after a substantial decline.
It will be worth watching whether orders continue to improve in the final quarter of the year. Without a stronger pipeline of new contracts, construction companies may find themselves competing for fewer available projects.
Building costs are rising again
Another concern is the cost of construction.
The ONS reports that construction output prices increased by 3.2% in the year to September 2026.
Although this is considerably below the extraordinary inflation experienced during 2022, it represents a renewed increase in the cost of delivering building projects.
This matters to private developers, housing associations, local authorities and government departments.
A housing development that was financially viable when originally planned can become considerably more expensive by the time construction begins.
Councils face a particular challenge. Capital budgets have to cover schools, roads, public buildings, housing and other essential infrastructure. When construction prices rise, the same budget delivers less.
Projects may have to be delayed, redesigned or reduced in scope.
For housing associations, higher building costs can also make it more difficult to provide affordable homes without additional public funding.
Scotland faces its own housing challenges
Although the ONS construction output figures cover Great Britain, the wider problems are particularly relevant to Scotland.
The Scottish Government's latest Housing Market Review reported that 17,057 new homes were completed in the year to June 2026. This was 2,123 fewer than in the previous year, a decline of 11%.
The reduction in social housing completions was even more pronounced, falling by 25% to 3,483.
These figures underline the difficulties facing Scotland as it tries to increase housing supply while dealing with homelessness, rising temporary accommodation costs and shortages of affordable homes.
There is also a regional dimension.
In areas such as Caithness and Sutherland, construction activity is important not simply because it provides buildings, but because it supports local employment, tradespeople, suppliers and smaller businesses.
Major energy and infrastructure projects can bring opportunities, but those opportunities need to translate into sustained local employment and contracts for local companies.
A large development does not automatically mean that the surrounding community benefits to the extent it might expect.
Infrastructure could provide an important lifeline
The stronger infrastructure figures are worth watching.
Britain has substantial requirements for investment in energy generation, electricity transmission, transport, water infrastructure and other essential facilities.
Scotland has a particularly important role in the energy transition, with developments involving renewable electricity, pumped storage, electricity connections and associated infrastructure.
Projects such as pumped storage schemes and electricity transmission developments can provide work for civil engineering companies, specialist contractors and suppliers.
However, there is a difference between announcing projects, obtaining planning permission, awarding contracts and actually getting work underway.
Delays in planning, financing, procurement and grid connections can leave construction companies waiting for the promised workload.
For smaller communities, the challenge is ensuring that major investment produces lasting economic benefits rather than simply bringing in temporary contractors.
A construction industry still waiting for recovery
The latest ONS figures present a mixed picture.
September's improvement and the increase in new orders offer some encouragement. Infrastructure and public-sector work are helping to offset weakness elsewhere.
But private housebuilding remains a major concern, overall construction output declined during the quarter and building costs are once again increasing.
The consequences extend beyond construction companies. Fewer new homes mean greater pressure on housing supply. Delayed public projects mean communities wait longer for essential facilities. Rising building costs place further pressure on already stretched public finances.
The Government's ambitions for economic growth, housing delivery and infrastructure investment will be difficult to achieve without a healthier construction industry.
The real test will be whether September's improvement develops into a sustained recovery, or whether it proves to be a temporary interruption in a much longer period of weakness.
For now, the figures suggest that Britain's construction industry is still waiting for the stronger demand and investment needed to move forward.
Read the report HERE