UK construction is forecast to edge back into growth, with housing leading demand and timber playing a central role. But this recovery remains fragile, with high costs, planning delays, and political uncertainty still threatening momentum, according to new forecasts from Glenigan and the Construction Products Association.
The UK construction industry faces a mixed outlook for 2026 and 2027, with forecasts pointing to a slow but steady recovery tempered by deep uncertainty over government policy, global conditions, and supply chain pressures. While housing is expected to drive growth, underpinned by ambitious targets and renewed funding, the industry remains vulnerable to economic shocks and systemic challenges. Timber’s importance in particular is growing as a sustainable, fast-build solution, but its expansion will depend heavily on reforms translating into real delivery.
Both Glenigan’s Construction Industry Forecast 2025–2027 and the Construction Products Association’s (CPA) Summer 2025 Forecast emphasise that while growth is achievable, confidence in the industry remains fragile. Glenigan notes that “economic growth is expected to accelerate further during the second half of this year and maintain momentum during 2026 and 2027″, but warns that this is contingent on falling borrowing costs and easing geopolitical tensions.
The CPA stresses that “the only clear certainty is uncertainty,” citing risks including fiscal tightening, labour shortages, insolvencies, and rising costs.
Conditional growth in the housing sector
Private housing, a cornerstone of timber demand, is expected to see some of the strongest gains, but the forecasts show that this optimism is conditional. Glenigan projects private housing project starts to rise from £27.34 billion in 2025 to £29.95 billion in 2026 and £35.31 billion in 2027, year-on-year growth of 10% and 18%. This is linked to lower interest rates and a gradual improvement in household finances.
The CPA’s figures are broadly consistent, with completions forecast to grow by 6% in 2026 and 5% in 2027. However, their report highlights persistent barriers to delivery, including planning delays, the regulatory burden of the Building Safety Act, and patchy government implementation of housing programmes.
Timber’s role in meeting housing demand is well established, with around 30% of homes in the UK already built using timber frames. Off-site timber solutions are seen as key to scaling housing delivery quickly, but any slowdown in planning reform or funding releases could stall momentum.
Social housing and retrofit challenges
Social housing activity is also expected to strengthen in the coming years, but faces similar uncertainties. Glenigan reports growth from £8.07 billion in 2025 to £9.68 billion in 2027, with annual increases of 3%, 8%, and 11%. The report says: “Social housing construction activity is expected to pick up over the forecast period… additional funding commitments in the Spending Review are expected to support a strengthening development pipeline and subsequent starts during 2026 and 2027.”
The CPA provides context, showing how delivery has been constrained in recent years. “The social rent tenure has accounted for a rising proportion of GLA-funded affordable starts in London, from 22.4% in 2017/18 to 72.8% in 2024/25… The SAHP targets a considerable increase to 60%.”
However, the CPA warns that resources are being stretched thin: “Repairs, maintenance and improvement of the existing stock is a key focus for social housing providers…However, limited social housing budgets are struggling to cover the increase in R&M pipelines and growth rates are expected to remain constrained.”
This reflects the wider challenge of delivering affordable housing at scale despite funding pledges, particularly if planning reforms stall or local authorities face further budgetary constraints.
Recovery for commercial and industrial sectors
Growth forecasts for offices, retail and logistics suggest some momentum returning to these markets, but once again they highlight caution among investors.
Glenigan expects office project starts to grow by 23% in 2026 and 7% in 2027, with retail up 17% and 9%, and industrial facilities increasing 7% and 9%. These figures suggest a recovery from recent lows, yet Glenigan’s analysis makes clear that the sector remains vulnerable, noting: “The sector is expected to return to growth from this year as lower borrowing costs renew investor interest…regulatory changes and growing demand for premium office space with a good environmental performance is forecast to generate retrofit and newbuild opportunities over the forecast period.”
The investment appetite is therefore tied to regulatory certainty and interest rate cuts, both of which remain at risk from global economic volatility. Timber’s growing role in high-quality, low-carbon office projects offers opportunity, but large-scale adoption will depend on investor confidence.
Long-term uncertainty for infrastructure and civil engineering
Infrastructure spending is another key driver of growth, with Glenigan forecasting civil engineering project starts of £9.99 billion in 2026 and £10.23 billion in 2027 – annual growth of 12% and 2%. This is supported by multi-year commitments such as the £104 billion water infrastructure plan, but the CPA report warns that political changes could derail these programmes, particularly if a new government reprioritises capital investment.
The ripple effect of infrastructure development on housing and commercial demand will be important for timber manufacturers, but delays or funding revisions remain a risk.
Planning reform remains ambitious but unproven
The Planning and Infrastructure Bill is seen as critical to unlocking housing growth, yet it is still too early to assess its effectiveness.
Michael Cameron, Lead Policy Analyst at DeHavilland, describes the Bill as “both an evolution and a gamble… it reforms the planning system, arguably, more than any Government in a generation”. While its measures to streamline approvals and limit judicial reviews could speed up delivery, success depends on secondary legislation and local authority capacity to implement reforms.
Timber frame manufacturers and modular builders, whose business models rely on rapid project delivery, are particularly exposed to whether this reform agenda from government succeeds.
Persistent supply chain pressures
Material price volatility remains one of the biggest threats to the sector’s recovery. The CPA emphasises that “chemicals, electronics, energy, food products, metals, packaging, and timber were all reported to have risen in price in the PMI.”
While timber prices have largely stabilised since their post-pandemic highs, energy costs, shipping delays, and geopolitical tensions could still reverse this trend, potentially threatening margins for developers and suppliers.
Insolvencies, especially among small and medium-sized firms, are another area of concern, as tighter credit conditions could limit contractors’ ability to scale up even if demand strengthens.
A fragile but promising outlook for timber
Timber remains central to construction’s transition to sustainable practices, and its adoption in the mainstream construction sector will likely accelerate over the next two years.
Off-site timber solutions offer a way to achieve housing and net-zero targets efficiently, making it a material of choice for both private and public projects. However, like the construction industry as a whole, its growth is intertwined with broader economic stability, effective reform delivery, and infrastructure investment. The industry faces major challenges that could derail momentum if the UK’s economic or political conditions worsen.
By 2027, construction output may well have recovered from recent lows, with housing leading demand and timber firmly embedded in the UK’s building strategy. But success will depend on the industry’s ability to navigate high costs, regulatory hurdles, and volatile global markets.
Rebecca Larkin, CPA’s Head of Construction Research, said: “The forecasts envisage demand and activity gradually picking up but, with all the uncertainties around the economy, the key question for housing newbuild and RM&I is still ‘when’. The government focus on capital investment in the Spending Review, plus the 10-year infrastructure strategy, have helped plot a path to long-term growth, but it is looking increasingly likely the Chancellor will need to raise taxes or cut capital expenditure – or both – in the Autumn Budget. This would directly affect the largest private [and public] construction sectors, depending on where expenditure cuts fall.”
This article was originally published in Supplying Timber‘s Autumn 2025 issue.
