Written by the Leading Edge team – 20th August 2026
The UK construction market remains difficult as we move through the second half of 2026. However, the headline figures increasingly conceal a much more varied picture beneath the surface.
The latest Construction Products Association (CPA) Summer Forecast expects total construction output to fall by 3.3% in 2026, with particularly sharp falls in private housing and housing repair, maintenance and improvement. Infrastructure, however, is forecast to grow by 3.2%, while the CPA also identifies energy and water infrastructure, data centres and commercial refurbishment and fit-out as areas of continuing growth.
Glenigan paints a similarly uneven picture. It forecasts the value of project starts below £100 million to fall by 1% overall in 2026, before rebounding by 11% in 2027. Within that total, office starts are forecast to rise 21% this year, education by 8% and health by 9%, while private housing, industrial and hotel and leisure starts decline.
The message for manufacturers, suppliers and contractors is therefore becoming clearer: there may be limited value in thinking about construction as one market. Finding where investment is actually being committed is increasingly important.
Construction Downturn Eases – But Activity Is Still Falling
There were at least some encouraging signs in the latest S&P Global UK Construction PMI.
The headline Total Activity Index rose sharply from 38.4 in June to 44.7 in July. This remains below the 50.0 level separating growth from contraction, but represented the slowest decline in construction activity for four months.
All three main construction sectors improved. Commercial activity remained the most resilient, rising from 41.5 to 46.8, while housing increased from 35.9 to 41.8. Civil engineering recorded the largest month-on-month improvement, from just 22.1 in June to 38.3 in July, although it remained the weakest-performing sector.
Perhaps more significant for the months ahead, the New Orders Index rose to 47.6, its highest for ten months. Survey respondents reported signs of improving tender opportunities across commercial development, residential projects and transport infrastructure.
Confidence also strengthened: 38% of construction businesses expect activity to increase over the next 12 months, compared with 17% anticipating a decline.
This isn’t a recovery yet. But after the particularly sharp downturn seen during the second quarter, July provides some evidence that conditions may be beginning to stabilise.
Water Investment Moves from Pipeline to Projects
Water is perhaps the clearest example this month of investment translating into tangible construction activity.
The CPA forecasts infrastructure output to increase by 3.2% this year, despite the wider construction downturn, and specifically identifies energy and water infrastructure among the areas supporting growth. Glenigan similarly expects rising water-sector capital expenditure to support civil engineering activity as AMP8 programmes gather momentum.
And we’re now seeing this feed through into projects.
Costain has been awarded around £150 million of work to upgrade wastewater treatment assets across 15 Thames Water sites in the Thames Valley. The work forms part of Thames Water’s Wastewater Asset Assurance Programme and will include upgrades to inlet stations, storm tanks and wastewater systems during AMP8, which runs from 2025 to 2030.
There is even greater investment further east. Anglian Water’s AMP8 programme includes £1.6 billion of investment during 2026/27 alone, part of an £11 billion five-year programme to upgrade water and sewerage infrastructure across the East of England. It has also launched a £1.5 billion Major Projects Framework to support delivery of major water and water-recycling infrastructure.
For the construction supply chain, these are important distinctions. They are not simply long-term government aspirations or projects awaiting policy decisions: capital programmes are moving into procurement and delivery.
Data Centres: A Growing Construction End Market
Data centres are another increasingly important exception to the subdued overall construction picture.
Both of our main forward-looking construction forecasts highlight the sector. The CPA identifies data centres as one of the niche areas continuing to grow during 2026, while Glenigan points to sustained demand driven by AI and the need for modern digital infrastructure.
Recent company results provide some indication of just how quickly this market is developing.
Kingspan’s Advnsys division, which provides critical infrastructure solutions including cooling and ventilation for data centres, increased revenue by around 34% in the first half of 2026, while trading profit rose 45%. Order intake and backlog more than doubled year-on-year.
Kingspan has also agreed to acquire BMC Manufacturing for an initial €850 million. BMC designs and manufactures electrical power systems for data centres, and the acquisition expands Kingspan’s offer across power, cooling and containment.
This matters beyond the technology sector. AI and cloud investment ultimately translates into physical construction demand: buildings, foundations, power infrastructure, cooling and ventilation systems, insulation and building-envelope products, as well as substantial supporting electricity infrastructure.
The opportunity is considerable, although development is not without constraints. Grid connections, available power, water, planning and local infrastructure are all likely to influence how quickly the UK’s data-centre pipeline can be delivered.
Gatwick Demonstrates Continued Private Infrastructure Investment
Another significant source of construction activity is transport infrastructure.
London Gatwick’s Northern Runway project represents £2.2 billion of privately financed investment. The project would move the existing Northern Runway centre line 12 metres north, allowing the runway to be brought into routine use alongside the airport’s main runway.
Gatwick describes the scheme as ‘shovel ready’ and estimates that it could generate an additional £1 billion of economic activity each year and create around 14,000 jobs.
Importantly, the runway project sits alongside a much wider programme of airport investment. Gatwick’s rolling five-year Capital Investment Programme contains close to £2 billion of investment in airport facilities and infrastructure, covering areas ranging from capacity and passenger facilities to sustainability and electrical infrastructure.
Again, the significance for the construction sector is not simply the headline value of one major project. It is the wider ecosystem of construction, refurbishment, infrastructure and building-services work generated by sustained investment from a major end client.
Building Product Demand Remains Under Pressure
None of this means the difficulties facing the wider construction supply chain have disappeared.
The CPA forecasts private housing output to fall 10% in 2026, private housing RM&I to fall 8% and commercial new-build output to decline 4.9%. It also warns that rising costs and weak confidence continue to affect project viability.
The latest PMI reinforces that message. Purchasing of construction products and materials declined for the 20th consecutive month in July, albeit at the slowest rate since September 2025. Input cost inflation also remains elevated, despite easing for a second consecutive month.
For manufacturers and suppliers, therefore, the immediate challenge remains demand rather than simply the industry’s ability to supply.
There is also a potential longer-term problem. If manufacturers respond to prolonged weak demand by reducing investment, employment or production capacity, the supply chain could find itself less able to respond when construction activity eventually strengthens.
Final thoughts from Leading Edge
The latest figures still paint a challenging picture for UK construction. Activity is contracting, demand for construction products remains subdued and forecasts for 2026 have weakened.
However, the picture beneath those headline figures is increasingly important.
Investment is continuing to move forward in areas such as water infrastructure, data centres and airports, while forecasts point to stronger prospects in sectors including education and healthcare. At the same time, other major markets – particularly private housing and repair and maintenance – remain under considerable pressure.
For construction product manufacturers and suppliers, this means that understanding where growth is happening may be more useful than focusing on whether the overall market is growing or declining.
The opportunities over the next 12–24 months are unlikely to be spread evenly across construction. They will be concentrated in particular sectors, projects, regions and customer groups. Identifying those areas – and understanding what is driving specification and purchasing decisions within them – will therefore be increasingly important.
There are some tentative signs that the sharp downturn seen during the second quarter may be starting to stabilise. But for now, we think the strongest opportunities will come from looking beyond the headline market and focusing on where investment is actually translating into construction activity.
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Leading Edge provides specialist market research and intelligence for the construction and building products sectors. We help manufacturers and suppliers understand market size, growth opportunities, customer demand, competitors and the sectors most likely to drive future sales.
Sources: Construction Products Association | Glenigan | S&P Global | Costain | Thames Water | Anglian Water | Kingspan Group | London Gatwick
