According to the Construction Products Association’s Autumn forecasts, published this week, total construction output is forecast to rise by 2.5% in 2025 and 3.8% in 2026 after falling by 2.9% this year.

In private housing – the largest construction sector – falls in interest rates and mortgage rates appear to lead to a gradual recovery in demand for the wider housing market. This is expected to lead to better prospects for housebuilders.

The new government has shown clear intent to boost house building by easing planning by proposing major changes to the National Planning Policy Framework. These changes could ease one of the most-cited supply constraints, particularly for smaller house builders.

Despite this, the key fundamental supply issues remain the same: local authorities lack planning resources, nutrient and water neutrality issues, and Biodiversity Net Gain.

There also appear to be considerable delays in starting high-rise housing and some commercial buildings due to uncertainty over the Building Safety Act and a lack of capacity at the Building Safety Regulator.

However, after a 9.0% fall in activity this year, private housing output is forecast to rise by 8.0% in 2025 and 7.0% in 2026. In addition, the risks tend to favour the upside if the Chancellor uses her Autumn Budget to enable further demand in the private housing market and substantially increase funding for affordable housing in the near term.

Private housing rm&i, the second-largest construction sector, is heavily dependent on consumer sentiment, real wage growth and home moves, which drive an increase in significant home improvements within 6-9 months of moving into a property

The expected recovery in the wider housing market, combined with improving consumer confidence and sustained real wage growth, is likely to boost rm&i activity from Q2 2025.

In addition, there has been a shift in home improvement spending over the last two years towards energy-efficiency retrofit and solar photovoltaic work, which continues to remain strong whilst building safety activity also provides a steady pipeline of activity.

Overall, private housing rm&i output is forecast to rise 3.0% in 2025 and 4.0% in 2026 after a 4.0% fall in activity this year.