Construction Market Overview: June 2025
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Construction Activity Showing Mixed Signals, but Forecasts Point to Gradual Strengthening
The ONS have published their construction output data for April 2025, showing that UK construction output grew 0.5% over the three months to April 2025, supported by a 0.9% rise in new work and a modest 0.1% rise in repair and maintenance over the period. On a monthly basis, April saw an increase of 0.9%, driven by growth in both new work of 1.4% and repair and maintenance of 0.3%. Alongside this, infrastructure new work and private housing repair and maintenance both saw strong performances, rising by 2.0% and 1.5%, respectively.
In May, UK construction activity continued to contract marking the fifth consecutive month of decline, though the rate of slowdown eased slightly, with the S&P Global UK Construction PMI® increasing to 47.9 from 46.6 seen in April, marking the highest since January 2024 but remaining below the 50.0 threshold that signals growth. While total new work and output remained in decline for May, the rate of contraction eased notably, with commercial activity falling marginally, compared to deeper contractions in civil engineering and housebuilding. Overall, around 39% of firms forecast an increase in output over the coming year, while only 16% expect a decline. This is despite cost pressures persisting, particularly for aggregates, insulation, and concrete, although overall input price inflation was the least marked in four months. However, improving business sentiment suggests optimism for a recovery, supported by expectations of falling borrowing costs and increased infrastructure activity.
The latest Construction Industry Forecast for 2025-2027 from Glenigan predicts steady growth across most UK construction sectors, driven by improving economic conditions, easing interest rates, and increased government investment. Total underlying project starts are expected to grow 3% in 2025, followed by stronger rises of 10% in 2026 and 11% in 2027. Private housing is forecast to rebound with an 8% increase in 2025 and accelerating growth thereafter, while social housing, industrial, and civil engineering sectors also show positive momentum. Office construction is predicted to rise 14% in 2025 and 23% in 2026, supported by demand for premium and retrofit space. Meanwhile growth in education and health will be underpinned by targeted public funding and regulatory reform to unlock delivery. Despite persistent challenges such as labour shortages, planning delays, and margin pressures, the outlook is broadly optimistic, with construction looking to prepare for a more technology-driven future.
And, the May 2025 RIBA Future Trends survey reveals growing optimism across UK architects, with the Future Workload Index rising to +11, an increase of eight points compared to April and the highest level since mid-2022. 30% of practices expect workload increases over the next three months, while only 19% anticipate a decline as confidence is broad-based, with positive outlooks across all regions and sectors. Larger practices (11+ staff) are the most optimistic, with a workload index of +28, while smaller firms remain more cautious. However, average workloads remain 6% lower than a year ago, and challenges such as planning delays, rising national insurance costs, and fee pressures continue to affect the profession.
Cautious Optimism Grows in UK Housing Market as Summer Approaches
According to the Bank of England, in April the number of mortgages approved for house purchase fell for the third consecutive month to 60,463, which is 4.9% lower than March and 2.1% lower than a year earlier. The fall in approvals for April was expected, given that many homebuyers bought forward mortgage applications, approvals and consequently transactions to get ahead of the stamp duty changes that took place on 1st April.
However, the May 2025 RICS UK Residential Market Survey shows continued recovery in the housing market, with new buyer enquiries, agreed sales, and new instructions all rising for the third consecutive month. The headline sales indicator moved into positive territory (+8) for the first time since early 2022, supported by growing buyer demand and improving market sentiment. Near-term expectations for sales and prices have become more optimistic, while 12-month price expectations reached their highest level since early 2022. Respondents cite falling mortgage rates and improved affordability as key drivers of this market rebound, despite supply constraints remaining an issue, with stock levels still relatively low.
Nationwide report that in May 2025 UK house prices increased 0.5% month-on month, with annual growth also increasing slightly to 3.5% from the 3.4% seen in April, as official data shows that there was a significant jump in residential property transactions in March, with buyers bringing forward their purchases to avoid additional stamp duty costs. In contrast, Halifax report that in May 2025, UK house prices fell by 0.4% compared to the rise of 0.3% seen in April, with annual growth slowing to 2.5% . Overall, house prices show signs of returning stability for the rest of this year following some modest price changes at the beginning of 2025.
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