Construction Activity Remains Sluggish Despite July Uptick

Monthly construction output is estimated to have grown by 0.1% in July 2026, propped up solely by repair and maintenance which grew by 0.8%.

Despite this uptick, total new work remained sluggish, falling by 0.4%, with the largest contribution to the decrease coming from private housing new work, which fell by 4.9%.

Quarterly Output

In the three months to July 2026, total construction output fell by 0.5%, ending a run of four consecutive increases in the three-monthly series.

Over the three-month period, both new work, and repair and maintenance fell by 0.4% and 0.7%, respectively.

At the sector level, six out of the nine sectors fell in the three months to July 2026. The main negative contribution to the decrease was private housing repair and maintenance, which fell by 1.7%.

INDUSTRY COMMENT

Clarity Needed

Richard Cook, Head of Economics at Pegasus Group, commented: “Today’s construction output statistics continues the wider trend of economic indicators bumping along the bottom. Whilst in a comparatively better position than some of its European neighbours, construction is such a big factor in the UK economy that today’s figures should prompt those in government to sit up and take notice.

“With the Autumn Budget on the horizon, the Chancellor will need to deliver a clear and compelling speech in the Commons to restore essential confidence among businesses and investors. With the private sector accounting for around 80% of all jobs nationally, it is vital that the government provides clarity on how it plans to attract investment and give businesses the confidence that it is on their side.

“Construction is a fundamental pillar of the UK economy, but developers need to feel that it’s okay to make a profit. You can’t give a developer planning permission for a project in which they will make a multi-million-pound loss. As build costs continue to increase at a significant rate, that cost has to be passed on to the end user to make the numbers work, shrinking demand by exacerbating affordability, and that’s something we’d like the government to address.

“It’s clear that costs and regulations are suffocating progress. The government needs to enact fundamental reform or risk essential investment going to more fertile international shores. The question now is whether the government can or will act swiftly before the ship has left the port.

Proof in the Pudding

“The government deserves credit, however, for doing a genuinely good job with the NPPF. The new NPPF is finally giving the industry clarity on what is needed in the planning process, creating a stronger platform for increased housing delivery, and a nod that construction growth might be on the horizon.

“A key indicator of its success will be measured in the planning pipeline for the coming quarters, particularly in London where viability issues are most acute. London accounts for almost a quarter of the country’s GDP and so getting this right is paramount to the success of the government’s growth agenda. If we are serious about solving the productivity puzzle and seeing some genuine long-term growth in the data, then the recent influx of positive government sentiment will need to translate beyond the rhetoric, in tangible and actionable benefits that boost activity for the residential and commercial real estate sectors.

“Stepping back, it is important to recognise that over the past two decades the UK has demonstrated remarkable resilience in the face of both global shocks and domestic challenges. Despite economic downturns, political change, and external market shocks, the country has consistently demonstrated an ability to adapt and recover. This resilience has been underpinned by strong socio-economic fundamentals, a flexible labour market, and well-established institutions, helping to sustain GDP and maintain economic stability relative to many advanced economies.

“Whilst the government may have conceded that the 1.5 million new homes target is unreachable, all eyes should be fixed on meeting the annual 300,000 new homes target by the end of the parliament – a goal which has been strengthened by clarity from the NPPF. Reaching this ambition will be a key indicator of the efficacy of the government in turning rhetoric into reality. The proof will be in the pudding.”

External Pressures

Matthew Jones, Founder of Financial Software Firm OpenECX, said: “The increase is encouraging, but one positive set of figures shouldn’t disguise the pressures firms are still facing. Geopolitical uncertainty and disruption from the Iran war continue to put pressure on already tight margins, so the question is whether this momentum can be sustained.”

“In such an unpredictable environment, construction firms need to focus on managing the things they can control. They can’t dictate what happens to global supply chains, but they can drive efficiencies in their own back office to help protect and maximise margins. Invoicing is a good example. With so many contractors, subcontractors and suppliers involved in a typical project, errors caused by manual reporting, data entry mistakes, or even typos, can quickly have significant knock-on effects on the ability to deliver and complete work. Getting the right tools in place to that back-office burden away means businesses can spend more time on strategic revenue generating activities. And unlike many of the external pressures facing the sector, these are improvements that will continue to deliver efficiencies long after the current uncertainty has passed.”

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