2025 was a rocky year for the sector. From a widening skills gap and rising material costs to regulatory changes and a prolonged slowdown, there were plenty of factors dampening confidence. As we look ahead, the question remains: will the outlook for the construction industry improve in 2026, or will these pressures continue to hold it back?
With The Guardian reporting the sharpest slowdown in construction activity since the first Covid lockdown — and the sector recording some of the highest insolvency levels — uncertainty has undoubtedly shaped decision-making across the industry this year.
However, the construction industry forecast offers cautious optimism. Output is predicted to grow by 2.3% in 2026, supported by major government funding packages aimed at boosting apprenticeships and skills training, increased investment in affordable housing, AI and digital capability, new towns, the new Planning and Infrastructure Act, and the long-term 10-year infrastructure strategy.
So, will this injection of funding and reform be enough to get the sector back on track? Or will fiscal drag, business cost pressures and high tax burdens continue to disrupt progress? Read on to explore the outlook for the construction industry in 2026 and the key trends shaping the year ahead.
Key trends shaping the construction industry in 2026
Workforce growth due to increased demand
With Labour’s commitment to delivering 1.5 million homes by 2030, alongside the growing need for retrofit projects and major infrastructure development, demand across the sector is set to remain strong in 2026.
As a result, the industry will need more skilled workers and apprentices to meet this demand. At the same time, as technology becomes more embedded across construction workflows, the skills mix will continue to evolve. Roles such as BIM managers, digital planners, surveyors and off-site manufacturing specialists are expected to grow as construction becomes increasingly data-driven and digital-first.
CITB’s latest workforce outlook signals growth across the UK, indicating tighter labour markets as workloads rise and output improves. To stay ahead, contractors need sharper labour planning, faster pre-approvals, and consistent training pathways across their supply chains – practically, that means moving checks upstream with online pre-registration, Right to Work/CSCS validation, and inductions so only approved operatives reach the gate, protecting safety and cutting first-day false starts.
Infrastructure investment
The government’s 10-Year Infrastructure Strategy is set to inject at least £725 billion into economic and social infrastructure over the next decade, creating a strong pipeline of work across transport, energy and public service assets such as hospitals and schools.
Transport and connectivity projects are also forecast to rise, with upgrades to rail, tram and bus networks generating long-term workloads for contractors and supply chains.
Meanwhile, investment in clean energy infrastructure will accelerate as the government works towards net zero targets. The National Infrastructure Pipeline (NIP) alone lists hundreds of projects, with regional spend forecasts exceeding £150 billion into 2026/27 across transport, utilities and social infrastructure.
Together, this distributed pipeline should help sustain construction activity and civil engineering workloads across the UK.
Technology drivers
One of the most influential construction industry trends expected for 2026 is the continued rise of technology in construction. Digital tools are now streamlining every stage of the construction supply chain and worker journey.
From software that digitalises onboarding, risk management, timesheets, identity checks and online inductions, to data-driven insights that support better decision-making, and hardware that improves site access and health and safety, technology is becoming essential to running safer, more efficient and compliant sites.
When implemented effectively, construction digitalisation can also reduce administrative delays and support faster planning decisions — exactly what the industry needs as workloads increase.
Cost pressures
Cost pressures are easing compared with the 2022–23 shock, but inflation hasn’t gone away: BCIS and market trackers point to milder cost growth into 2026, while ONS output data through late-2025 showed uneven month to month movement, so prelim control still matters.
Adding in tax rises, wage inflation and ongoing material cost volatility, and margins will remain tight for contractors of all sizes in 2026. Strong cash-flow control and proactive risk management will remain critical.
That said, businesses that use technology to replace lengthy manual processes such as risk assessment and method statements (RAMS), can significantly reduce administrative time and minimise avoidable risks that lead to delays or cost overruns, helping to offset some of these pressures.
Sustainability and retrofit focus
Investment in sustainability in construction is set to continue into 2026 as net zero targets draw closer, with growth expected across green infrastructure, low-carbon energy and large-scale retrofit programmes; pushed by standards such as Future Homes and rising running-cost pressures, and reinforced by parliamentary scrutiny for a long-term Warm Homes Plan beyond 2026.
Environmental regulations will increasingly shape building design, material selection and construction methods, while on live sites delivery discipline (fewer clashes and idling) and materials tracking feed ESG returns and client reporting. This shift not only tightens project requirements but also opens opportunities for firms that can prove strong sustainability credentials and provide digital oversight of carbon, compliance and supply chain performance.
Building Safety Act 2026: The golden thread
In 2026 the Building Safety Act shifts from “new regime” to everyday reality: clients, the Building Safety Regulator, and building control will expect clear dutyholder accountability, competent Principal Designer/Principal Contractor roles, and a verifiable golden thread from procurement through handover and occupation—tightened further by the BSR’s restructuring from 27 January 2026, continued pressure to unblock Gateway 2/3 determinations, and the Building Safety Levy coming in from 1 October 2026.
For higher-risk buildings, safety cases and mandatory occurrence reporting demand auditable evidence of who was on site, when, doing what, and under which RAMS; across all projects the direction is the same - prove competence, trace decisions, and keep records structured, searchable, and current. Practically, that means moving checks upstream (Right to Work, CSCS, inductions), making access conditional on approvals, linking people to permits and briefings, and consolidating data into portfolio dashboards so contractors can pass audits with confidence, cut dispute risk, and show that safety, quality, and compliance are managed by design, not reconstructed at final account.
How to ensure your construction business is ready?
The outlook for the construction industry in 2026 points to a year of moderate growth, increased technology adoption and continued workforce expansion. For construction businesses, being “ready” will mean balancing rising demand with tighter margins, evolving skills requirements and greater regulatory scrutiny.
First, workforce planning will be critical. With labour demand expected to rise across housing, infrastructure and retrofit projects, businesses should invest early in apprenticeships, upskilling and clear onboarding processes to attract and retain talent. Creating a consistent, compliant worker journeys — from pre-employment checks through to site access — will help reduce delays and improve productivity.
Embracing digital tools will no longer be optional. Construction technology can help businesses streamline administration, strengthen compliance and gain real-time visibility across projects. Digitalising processes such as inductions, identity checks, time and attendance and access control reduces reliance on manual paperwork, minimises risk and enables faster, more informed decision-making as workloads increase.
Speak to MSite about digitalising your workforce for the future
At MSite, we support construction businesses at every stage of the worker journey — from pre-registration and online inductions to identity checks, time and attendance, and access control.
If you’re ready to future-proof your workforce and improve site safety, compliance and efficiency, get in touch with our team today to find the right solution for your business.