“Despite continued geopolitical uncertainty on a global scale, in the UK we are starting to see some green shoots… a brighter outlook than we’ve had for some time.”
- Allan Wilen, Economics Director at Glenigan
For years, the industry has been in survival mode. Sharp rises in material costs, tight labour markets, and subdued demand limited growth. Now, stronger consumer spending power and government-backed programs are restoring confidence.
Forecasts indicate:
After several years of volatility, private housing projects are gaining momentum.
“We’ve already seen a strong rise in the value of private housing projects starting on site this year, and that’s likely to flow through further as the year progresses.”
Drivers include:
The consensus is for house prices to rise by 4–5 percent in 2025, supporting further investment.
Government commitments to capital funding and a rent framework allowing housing associations to raise rents 1 percent above inflation for the next decade provide stability.
This creates more predictable cash flows, enabling housing associations to secure private financing for new developments.
After a period of consolidation since 2018, student accommodation is set for modest growth. Purpose-built facilities are replacing traditional buy-to-let arrangements, with universities and private investors responding to changing demand from both overseas and UK-based students.
Warehousing and logistics remain one of the strongest subsectors. Online shopping as a share of retail remains structurally higher than pre-pandemic levels.
“Earlier this year Amazon announced £5 billion worth of investment both in major hubs and smaller local distribution facilities.”
This renewed investment signals confidence in long-term demand. Third-party distributors and other retailers are following suit.
The overall volume of office space may be contracting due to hybrid work patterns, but demand is shifting to higher-quality assets.
“It’s been the premium and high environmentally performing offices that have held up well in terms of capital values and investor returns.”
Trends to note:
For AEC professionals, this means growing demand for LCA-backed retrofit strategies and low-carbon material choices.
With nearly 20 percent of retail space vacant, new build demand remains weak. Grocery retailers such as Aldi and Lidl are the exceptions, continuing expansion programs.
While exposed to rising labour costs, this sector is expected to benefit from stronger discretionary spending and a return to pre-pandemic levels of overseas tourism by 2027.
Investment in school buildings continues, driven in part by the need to address safety issues such as reinforced autoclaved aerated concrete (RAAC). The government’s program to refurbish or rebuild 500 schools will support steady demand through 2027.
Healthcare investment will grow gradually, with a focus on prevention and primary care facilities rather than large-scale hospital construction.
Civil engineering is forecasted to strengthen significantly, driven by transport and utility investment. The water sector alone plans £108 billion in investment, much of it earmarked for improving water quality, building reservoirs, and reducing leaks.
Even as demand strengthens, challenges remain:
Several EU-wide regulations — all with implications for UK exporters and global supply chains — are reshaping the sector:
For AEC companies, this means life-cycle assessment must be embedded into design and reporting. For manufacturers, it means verified EPDs and DPP readiness are now prerequisites for market access.
Key takeaway
The UK construction market is entering a period of recovery. Growth is projected across residential, industrial, and public infrastructure, but the next three years will also define a new baseline for compliance and sustainability.
For AEC professionals, embedding LCAs into every stage of project delivery is becoming a license to operate. For manufacturers, publishing verified EPDs and preparing for DPPs is no longer optional — it is the cost of doing business.
What is driving UK construction growth in 2025–2027?
Rising consumer demand, stable material costs, and government-backed housing and infrastructure investment.
Which subsector is leading recovery?
Private housing is leading the upturn, followed by logistics and premium office refurbishments.
How do regulations affect UK firms?
Any firm exporting to or working in the EU will need to comply with CPR, ESPR, EPBD, and CBAM requirements. This means verified carbon data for products and projects.
Why are EPDs and LCAs critical?
EPDs provide verified product-level data, while LCAs provide project-level carbon insights. Together, they are increasingly required by regulators, investors, and clients.
What is a Digital Product Passport (DPP)?
A structured digital record containing verified product data, required under ESPR and CPR. By 2030, many construction products sold in the EU will need a DPP.
How should companies prepare?
Adopt scalable LCA and EPD tools, embed carbon accounting into workflows, and train teams on compliance requirements.