UK market intelligence: balancing confidence, capacity and viability in 2026
At the start of 2026, the UK’s market outlook is moving towards growth, but still grappling with inflation, tighter public spending and fragile confidence.
Our economic overview
The key question for investors and project teams isn’t just ‘Can we fund it?’ but ‘Is it viable at every stage?’. Viability is now a constantly moving target that needs regular checks. Our latest UK market intelligence report explores how viability has become a live calculation, which needs to be stress tested from business case through to procurement and delivery.
Although at the start of 2026 construction output has stabilised, it remains fragile. Repair and maintenance activity has softened, while new work shows early signs of recovery, particularly in industrial and selected commercial sectors.
Public sector investment is gaining more interest, as contractors are gravitating towards projects with secured funding and clearer delivery pathways.
New orders are presenting a more optimistic picture and are rising strongly year-on-year. This suggests a pipeline that’s slowly regaining depth. However, conversion from order to output remains slow.
Planning delays, funding approvals and risk aversion continue to elongate timelines, reinforcing the importance of programme certainty and realistic procurement strategies.
Market sentiment reflects this tension. Our survey data shows that workloads remain under pressure, yet expectations for future activity into 2026 are improving as inflation eases and borrowing conditions gradually stabilise.
The next phase of recovery will depend on the industry’s capacity to efficiently mobilise labour, materials and capital.
Input cost analysis
Materials inflation has moderated, supported by less demand and competitive supply chains. However, labour remains the more persistent pressure point.
Workforce numbers have declined over the past year, reflecting contractor caution and rising employment costs.
Yet, as activity picks up, competition for skilled labour is likely to increase, placing renewed upward pressure on costs and programmes.
Our Tender Price Inflation forecast
Despite weak demand and high interest rates slowing construction, projects that are well-funded are moving ahead. Tender price inflation should stay steady, but labour and material costs need to be monitored if activity picks up.
For future projects and programmes, viability will define success. Clients that prioritise long-term value will be best placed to deliver assets that stay viable beyond initial build cost.
This can be achieved by maintaining flexible business cases, engaging early with the supply chain and adopting balance risk strategies.
In a market where selectivity matters more than speed, success will come from clear goals, strong collaboration and informed choices.
