Marked Upturn in Construction Predicted for 2027

Industry News

The construction forecast highlights a series of positive trends that are set to generate new construction work opportunities for businesses working in the private and public sectors over the next two years.

The latest construction forecast indicates that construction activity for schools, hospitals, and other key public sector non-housing projects is set to rise from this summer as increases in government capital spending take effect.

Meanwhile, increased investment in renewables and the electricity grid, along with the country’s water infrastructure, will give a boost to civil engineering workloads.

Contractors in the private sector stand to benefit from strong levels of new private office construction and refurbishment work, along with data centres and improved demand for logistics & warehousing space.

A Stronger 2027

Stronger consumer spending is set to boost private housing, retail, and hotel & leisure sector starts from 2027.

Although total underlying starts (projects valued under £100 million) are forecast to dip slightly this year, they are predicted to rebound by a healthy 11% next year, driven by strong rises in education, industrial, civil engineering, and private housing work. Overall, the construction forecast points to starts growing by a further 4% in 2028.

Glenigan Economics Director Allan Willen said: “While economic fundamentals are improving gradually, the translation into construction activity has been slow, with a more meaningful upturn now expected from 2027…. Developers are increasingly prioritising schemes with stronger margins or lower risk profiles, leading to a narrowing of the active pipeline.”

Education

Education stands out in the construction forecast as one of the most promising sectors for new work opportunities, as the School Rebuilding Programme gathers momentum and RAAC remediation work continues.

After an 8% rise in underlying education starts this year, they are predicted to rise by a further 20% in 2027, when they will be worth approaching £7 billion, and an additional 5% in 2028.

Although financial pressures mean new work on university projects will remain subdued, activity on further education college schemes is expected to grow over the coming two years.

Social Housing

The social housing sector stands to benefit from increases in government funding outlined in the Spending Review. Following two years of stagnant activity, starts in the sector are forecast to rise by 8% next year and a further 4% in 2028.

Changes to the social housing rent cap should help social landlords bring forward more projects, and faster approvals by the Building Safety Regulator (BSR) should mean more high-rise apartment schemes.

There has been a surge in planning approvals this year for social housing schemes in many regions across the country, particularly in London (where approvals are on course to reach £1.7 billion this year), but also in Scotland, the North West, East Midlands, West Midlands, East of England, and Yorkshire & the Humber.

Private Housing

The construction forecast also reflects improving market conditions in private housing, supported by lower interest rates and rising confidence.

Glenigan is forecasting underlying (under £100 million) private housing starts will rise by 13% in 2027 and by a further 5% in 2028. Housebuilders should also get a boost as regulations in the sector are eased and planning reforms make more sites available.

Health

Work prospects in the health sector should get a boost as more government funding is released for the New Hospital Programme, says Glenigan. After a 9% rise in underlying health sector starts this year, they are forecast to rise by a further 9% next year and an additional 14% in 2028.

As well as more new hospitals, activity in the sector should be sustained by government investment to deal with the large maintenance backlog and to improve building safety and resilience. Funding for new projects to modernise the NHS estate and boost capacity, such as diagnostic and community care hubs, are also expected to support growth in the sector.

Civils

Stronger investment by the utilities is set to be one of the key drivers of civil engineering work, where total underlying starts are forecast to rise by 15% next year. More road and rail projects will also help to sustain activity in the sector over the coming two years.

Growing investment in electricity generation and transmission to meet net-zero targets will also help bolster civil engineering activity. Under its Great Grid Upgrade and wider programmes, National Grid is planning record multi-year capital spending of around £60–70 billion across 2026–2031, involving new overhead lines, substations, and subsea links.

Work on renewable energy schemes such as offshore wind and landmark nuclear projects, Sizewell C and Hinkley Point C, will also keep the sector busy.

Office

Businesses working in new office construction have been kept busy recently by the strong demand for corporate space – both new and refurbished – and the spread of new data centres, Glenigan says. Growth in the sector has been spectacular, and after rising by 24% last year, the new forecast suggests underlying office starts are on course for a further 21% increase this year.

Although office starts are set to slow next year as political uncertainty and rising costs – notably for data centre schemes – take their toll, a steadier return to growth is forecast for 2028.

Industrial

Business uncertainty, high interest rates, and rising energy costs have taken their toll on the industrial construction sector – particularly on work for manufacturers – although demand for new logistics and distribution space remains solid.

New warehouse space to accommodate online retailers and changing business supply chains is set to be the main driver of a marked upturn in industrial activity in the coming years.

After a 9% fall in industrial starts this year, and subject to continuing economic recovery, Glenigan is now forecasting a 16% rise in starts in the sector in 2027, followed by a further 5% rise in 2028.

Leisure

The hotel & leisure sector is also set for sunnier times next year after a tough 2026.

Rising wage and fuel costs and the hit to tourism from the Middle East war have dented confidence amongst hospitality providers. Overall hotel & leisure sector starts are forecast to fall by 12% this year, but are predicted to rebound by 11% in 2027, with little change the following year.

Trends in the sector remain positive, and underlying hotel & leisure planning approvals rose by 56% in the three months to April, compared to a year earlier.

The forecasts point to a growing pipeline of starts on hotels and guest houses and indoor leisure schemes over the next two years.

Retail

Following a sharp downturn in activity last year, new retail construction is levelling off in 2026 but is expected to see a solid recovery in 2027, helped by an improving economy and rising consumer spending.

Underlying retail starts tumbled by 28% last year, with little change expected this year, but Glenigan is forecasting a 10% rise in activity in 2027. New developments by supermarket groups – particularly the budget chains – are set to be the main driver of growth.

Outlook

With the pipeline strengthening and confidence gradually returning, the latest construction forecast signals a more resilient market outlook for the years ahead. While challenges remain in the near term, improving fundamentals and targeted investment are set to unlock sustained growth opportunities across the industry.