The latest State of Trade Survey showed that construction product manufacturing gained little traction in Q3.

Whilst there was growth in sales volumes reported over the quarter for both heavy side and light side manufacturers, heavy side sales were still lower than the same quarter of 2024. Particular weakness was reported by mineral product manufacturers of ready-mixed concrete, crushed rock and sand & gravel. Heavy side products, and particularly aggregates, are used in the early phases of construction and their weak performance highlights the slow progress of new project starts.

Back at the start of the year, house builders had been expecting demand to pick up throughout 2025, but even by Summer there had been little improvement in buyer sentiment, despite interest rate cuts during that time. Affordability, especially concerning deposits, continues to be cited as a barrier to first-time buyer purchases in areas with higher house prices, but is reported as less of a concern in areas of lower house prices. Instead, supply side constraints dominate: increased costs that affect site viability for house builders and developers.

Key findings

• 20% of heavy side firms and 29% of light side firms reported that sales rose in 2025 Q3, on balance
• However, on balance, 7% of heavy side firms reported a decrease in sales compared to a year earlier
• One-third of heavy side manufacturers and half of those on the light side expect sales to increase over the next 12 months
• Input price inflation was led by wages & salaries, raw materials and taxes
• There were still signs of spare capacity, particularly on the heavy side

The Construction Products Association’s Autumn Forecasts reveal that growth expectations for construction output have been revised substantially down amid growing risks and uncertainty surrounding the government’s impending tax rises in the Autumn Budget and their impact on the wider UK economy. Total construction output is now only forecast to grow by 1.1% in 2025 and 2.8% in 2026, which is a significant revision down from the 1.9% in 2025 and 3.7% in 2026 in the previous forecast.

Firms from across the construction supply chain are reporting that activity has slowed since the Spring, particularly in private housing, infrastructure roads, and commercial new build offices. Confidence among homebuyers, homeowners, and investors is weak; this has been exacerbated by uncertainty over the upcoming Autumn Budget and who will bear the brunt of the inevitable tax increases and potential spending cuts. The CPA has taken account of the pre-Budget uncertainty in its latest forecasts but, like all economic forecasters, will not be able to take account of the tax rises and spending cuts until they are confirmed on
26 November.

In private housing, which is the largest sector of construction, output is forecast to rise by 2.0% in 2025 and 4.0% in 2026, a revision down from the previous forecast of 4.0% in 2025 and 7.0% in 2026. After large falls in demand between 2022 and 2024, house builders continue to highlight that demand and affordability remain the biggest challenges in areas of the country where house prices are higher, even as interest and mortgage rates have fallen. Conversely, in parts of the country in which house prices are more affordable, site viability is a key problem due to the long list of additional costs that government continues to add to house building. In addition, high-rise developers continue to suffer from delays at Gateways 2 and 3, both for new build and changes in use from commercial developments to residential flats.

In private housing repair, maintenance and improvement (rm&i), despite sustained real wage growth, many households have continued to save rather than spend given the scarring effects of the ‘cost of living’ crisis. A sustained recovery in private housing rm&i will only occur when homeowners felt confident enough to commit to large, discretionary spending such as home extensions and renovations. This is unlikely to be before the Autumn Budget, given uncertainty over whether households will face tax increases, which suggests a recovery from Spring 2026 at the earliest. Furthermore, this would be delayed further if Budget tax rises affect homeowners. Some energy-efficiency retrofits, such as heat pumps and solar photovoltaics, subsidised by government, and essential fire safety remediation work, continue to be relatively strong small niches within the sector but overall, private housing rm&i output is expected to now remain flat in 2025 and only rise by 2.0% in 2026. Furthermore, risks to the sector remain on the downside.

In infrastructure, output is expected to rise by 1.9% in 2025 and 4.4% in 2026. However, there is a large variation in fortunes across the sector. Water & sewerage, as well as energy generation and distribution, are set to become key drivers of growth next year as activity ramps up under record investment plans. In contrast, road spending is expected to decline over the next few years as the next Road Investment Strategy (RIS) is not only delayed but headline funding has been cut compared to the previous RIS2. In rail, there are rising concerns regarding whether the government’s HS2 ‘reset’ may lead to delays going forward, whilst question marks continue over when major projects such as Euston station will commence given the intention for it to be privately financed.

Commenting on the Spring Forecasts, CPA Head of Construction Research, Rebecca Larkin, said:

“The pickup in construction activity that had been expected at the start of the year has not materialised as uncertainty continues to hold back house purchases, home improvements spending and private sector investment decisions. The risks and uncertainties around the impact of impending tax rises in the Autumn Budget in November have only intensified and this is likely to leave households and businesses holding off spending and investment for longer, and limit demand in the largest construction sectors.

“The effects of pre-Budget uncertainty are being felt now but the impact of the Budget tax rises will be felt most strongly as we head into 2026. Currently, the forecast is for 2.8% growth in construction output next year, primarily driven by public sector construction, infrastructure and house building. However, the extent of the government’s tax rises and spending cuts, and who bears the brunt of them, will heavily determine whether 2026 is a year of growth or contraction for the industry.”

FIS CEO Iain McIlwee has spoken openly to the BBC, in an interview broadcast on both radio and tv news thoughout the day, about millions of pounds owed to companies following the collapse of ISG last year and how promises that they would be protected by Project Bank Accounts seem to have been as empty as the bank accounts themselves.

The BBC investigation follows the failing of Project Bank Accounts which the MOJ said were being used on projects to upgrade three prisons in England.

At least 40 companies are believed to be owed the money for work they carried out in Birmingham, Liverpool and Dorset, and claim they should have been protected because the Ministry of Justice (MoJ) promised to pay for the projects through ring-fenced Project Bank Accounts (PBAs).

Project Bank Accounts were designed to safeguard smaller suppliers by holding payments in dedicated accounts that can only be used to pay them.  Money paid into PBAs should be handed out to suppliers almost automatically.  However, administrators EY-Parthenon insisted that when appointed the accounts had “nominal funds” in them, meaning the money was probably never paid in by the MoJ, with FIS CEO Iain McIlwee, describing the situation as a “mystery”.

Iain added:

“This is having a huge impact on small business owners, with some facing bankruptcy themselves and others struggling with significant mental stress and heartache.

“They are fighting to get back what they should have been paid 12 months ago. Companies are people and these are people in trouble that need the support of our government.”

FIS is supporting some of the businesses that are owed money by co-coordinating legal action alongside law firm Hill Dickinson.

Sarah Emerson, partner at Hill Dickinson, said they were engaged in pre-action correspondence with the MoJ on behalf of seven firms who worked on the projects. She said that her clients were small companies who felt let down and could not understand what had happened to the money they were owed.

“They were told this was a positive thing because [PBAs] would protect them from an insolvency event,” she said.

“They are set up as a trust mechanism which means funds are ring-fenced.  This means money in those Project Bank Accounts legally belongs to those that are due to be paid.”

Sarah Emerson said her firm could take the MoJ to court over the dispute

You can read the full article on the BBC website at https://www.bbc.co.uk/news/articles/c4gwz8gg6plo

Further coverage is also available on the following channels:

• Radio WM – Listen Live – BBC Sounds (approx 90 mins in
• BBC Radio Leicester – Ady Dayman (just after the 7am and 8am news).

In response to the Government’s consultation on tackling late payment and retention in the construction sector, FIS has submitted its formal response on the package of proposed legislative measures to address late, long and disputed business to business payments.

A copy of our collective response is available here.

Commenting on the response, FIS CEO, Iain McIlwee stated:

“For decades, FIS has fought tirelessly to expose and dismantle the broken payment and retention practices that plague the construction sector.   Drawing on powerful evidence from the Reading Report and direct member testimony, FIS response paints a stark picture: specialist contractors are routinely forced to finance projects upfront, endure months without payment, confronted by routine undervaluation and weaponisation of cash flow issues and suffer devastating losses when retention monies vanish due to insolvency.  The current system is adversarial, opaque, and punishes the very businesses that build our spaces.  It undermines investment and impairs modernissation. 

FIS supports bold reform—mandatory 60-day payment terms, statutory interest on late payments, and the abolition or protection of retention funds. 

The message is clear: enough is enough. Reform is not optional—it is essential to protect livelihoods, restore trust, and unlock the full potential of UK construction.”

The consultation acknowledged that late payment costs the UK economy almost £11 billion per year and closes down 38 UK businesses every day. The proposed package of measures are claimed to be the most significant attempt to address late, long and disputed business to business (B2B) payments in over 25 years. They aim to improve cash flow through supply chains and support small businesses with payment disputes. There are also specific proposals referring to the use of retention clauses within construction contracts.

The consultation outcome will be published within 12 weeks of the close of the consultation, or an explanation will be published if this is not possible.