The CPA’s forecast for construction output has been downgraded further in its Summer forecast, due to the lagged impacts of the Middle East conflict that are starting to pass through to both the demand and cost sides of the UK economy. Construction output year-to-date so far in 2026 has already fallen by 1.6%, according to the Office for National Statistics, even before the impacts of the conflict and it is now expected to fall by 3.3% overall in 2026. This fall is due to activity weakening considerably in the key sectors of private housing new build and private housing repair, maintenance and improvement during the second half of the year. Output is still expected to rise by 1.2% in 2027 but the risks remain heavily on the downside.

Private housing is the largest construction sector and house builders have begun to report that homebuyer demand has weakened sharply in recent months in line with the increase in mortgage interest rates since the Middle East conflict. This will exacerbate the issue of affordability, which was already a problem before the conflict, especially for buyers in areas of the country with higher house prices. In lower-priced parts of the country, house builders will have to deal with sharp cost increases when site viability is already an issue. A spike in construction product prices in the second half of this year will come on top of a list of additional regulatory costs imposed over the last few years, with the Building Safety Levy coming into force in October 2026 and the Future Homes and Buildings Standard, which will be implemented in March 2027. Overall, private housing output is forecast to fall by 10.0% in 2026, a downward revision from -7.0% in the Spring forecast and output is forecast to remain flat in 2027, the same forecast as in Spring, but now from a lower level.

Private housing repair, maintenance, and improvement (rm&i) is the second-largest construction sector. Basic repairs and maintenance activities have largely continued as usual, but there has been limited activity in home improvement projects, typically the key driver of growth. Even though many homeowners had the finances for projects over the last two years, they have increasingly focused on saving rather than spending, especially on discretionary, non-essential items such as home improvement projects, and this is likely to be the case as the cost of living rises in the next 12 months. In the long term, government-funded schemes for energy efficiency in the private housing stock may drive further growth in solar photovoltaic and heat pumps, although skills shortages may hinder this. Overall, private housing rm&i output is forecast to fall by 8.0% in 2026 and remain flat in 2027.

There is still expected to be significant growth in infrastructure, the third-largest construction sector, given longer-term existing contracts, pipelines of activity and funding in place for future projects. Energy generation and National Grid distribution work are expected to continue growing strongly, as is water investment. There is greater uncertainty in rail, with the HS2 cost-saving ‘reset’ now expected to be published only in Spring 2027, and in roads, following the just-departed Prime Minister’s announcement that further defence spending would be partly funded by cuts to new roads projects. Overall, infrastructure output is forecast to rise by 3.2% in 2026, unchanged from Spring, and by 3.2% in 2027, a marginal revision down from 3.4% in Spring.

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

“Construction activity so far this year is already lower than a year earlier and there is still considerable concern that we are yet to see the key impacts of cost inflation on projects down on the ground or the extent to which it affects appetite for signing up to or starting new projects. The biggest questions are how rises in construction costs, financing costs and the cost of living will affect the privately-financed sectors of private housing, private housing rm&i and commercial. Consequently, these sectors are forecast to experience the largest falls in output over the next 12-18 months.

 

Even in areas where we forecast growth, there is an increased risk that rising cost inflation eats into the volume of construction work, even if the values of work are maintained. In addition, this rise in construction costs runs alongside the government’s imposition of 50% import tariffs for imported steel since 1 July 2026 and the prospect of even higher financing costs if the Bank of England raises interest rates, which make worsening viability a key barrier for new projects to progress.

 

The arrival of the new Prime Minister emphasises that the new government will have to focus on enabling house building and construction demand, as well as focus on reducing cost burdens on the whole construction supply chain if it is serious about pledges for more new homes, more and better quality infrastructure and the Net Zero transition. This is a pressing issue as essential capacity and skills have been lost in the last two years and this will only get worse as activity falls over the next 12-18 months.”

FIS is preparing a response to the Ministry of Housing, Communities and Local Government (MHCLG) Call for Evidence on the future Strategy for the Built Environment Professions, Trades and Occupations. The consultation will help shape government policy on competence, accountability, behaviours and collaboration across the entire building lifecycle, with a new strategy expected in 2027.

Our draft response argues that while competence is often discussed in terms of skills, qualifications and regulation, the ability of competent people and businesses to deliver safe, high-quality and compliant work is fundamentally shaped by the conditions created through procurement and design processes. We contend that many project failures attributed to workmanship, quality, cost or programme pressures can be traced back to earlier decisions on procurement routes, risk allocation, appointment timing, design responsibility and project governance.

The draft focuses on four interconnected areas of risk:

• Procurement risk arising from late specialist engagement, unclear responsibilities and inappropriate transfer of risk.
• Design risk where specialist knowledge is introduced too late and unresolved assumptions are passed through the project lifecycle.
• Time risk created by programme pressures, poor transition from design to construction and inadequate site readiness.
• Cost and cash risk resulting from payment practices and commercial pressures that undermine investment in competence, training and quality.

A central recommendation is that procurement should be recognised as a primary control point for competence and accountability. The draft also proposes stronger use of Design Responsibility Matrices, greater recognition of specialist expertise during design development, clearer treatment of design-significant changes such as substitutions and value engineering, and the inclusion of key procurement and responsibility records within the Golden Thread.

This consultation provides an important opportunity to ensure that the practical experience of specialist contractors and the finishes and interiors sector is reflected in future government policy. To strengthen our response, we are seeking member input on whether the themes identified reflect current industry experience and to gather evidence, examples and case studies that demonstrate how procurement practices, design responsibility, programme pressures, site readiness and payment practices impact project outcomes.

We encourage all members to read the draft response and provide comments and suggested amendments to iainmcilwee@thefis.org by 10 August.

In particular, we welcome examples that illustrate the challenges and opportunities identified in the paper, as well as views on the key messages that FIS should prioritise in its final submission. Feedback will help ensure that our response accurately reflects the realities facing businesses across the finishes and interiors sector and maximises our influence on the future development of the built environment professions strategy.

Please send comments and evidence to FIS by 10 August 2026 to help shape the final submission

FIS is inviting members to take part in the Construction Showcase at this year’s SkillBuild National Final, taking place at the Marshall Arena, Milton Keynes, on 18–19 November 2026.

The Construction Showcase is an interactive experience hub featuring hands-on activities and live demonstrations designed to inspire young people to explore careers in construction. As part of the showcase, FIS will be highlighting the breadth of opportunities and skills within the finishes and interiors sector and we are looking for members to help bring the stand to life.

Whether through interactive activities, practical demonstrations or engaging displays, this is an excellent opportunity to promote your specialist skills, engage with future talent and help inspire the next generation to consider a career in the sector.

Construction Showcase opening times:

• Wednesday 18 November: 09:00–16:00
• Thursday 19 November: 09:00–15:00

If you’re able to support the FIS stand, please contact Beena Nana at beenanana@thefis.org by Friday 11 September.

The Construction Showcase forms part of the SkillBuild National Final, the UK’s largest multi-trade skills competition. Visitors will have the chance to watch the country’s top scoring apprentices and trainees compete across a range of trades including Drylining, Bricklaying, Carpentry, Plastering, Painting and Decorating, Wall and Floor Tiling, and Joinery, with projects transforming from blank canvases into impressive displays of craftsmanship, skill and precision.

Recruiting and retaining skilled people remains one of the biggest challenges facing our sector. The Government’s Youth Guarantee aims to help employers access new talent while giving young people aged 16–24 the skills, experience and opportunities they need to succeed.

For FIS members, the initiative offers practical support to strengthen your workforce and reduce recruitment costs through funded training, apprenticeships and employer incentives.

What support is available?

Eligible employers may be able to benefit from:

• Funded apprenticeship training and new apprenticeship incentives.
• The £3,000 Youth Jobs Grant for recruiting eligible young people claiming Universal Credit.
• Access to Sector-based Work Academy Programmes (SWAPs) to help recruit job-ready candidates with training tailored to your business.
• Support to provide work experience placements and connect with young people through local Jobcentres and Youth Hubs.
• Free recruitment support from Jobcentre Plus, including advertising vacancies, candidate matching and advice from dedicated Recruitment Consultants.

Whether you’re looking to recruit apprentices, site operatives, estimators, project managers or office based staff, these schemes can help you develop the skilled workforce your business needs while supporting the next generation of construction professionals.

Find out more

Get in touch with beenanana@thefis.org or marieflinter@thefis.org

Visit the Government’s Build Your Future Workforce campaign to explore the support available for employers and register your interest:

Build Your Future Workforce

You can also find guidance on apprenticeships, grants and recruitment support through GOV.UK employer guidance.

The Government has confirmed right to work checks will be extended from 1 October 2026 to include casual or temporary workers, subcontractors and agency workers supplied through contractual chains. Employers have the following options for ensuring an individual has the right to work in the UK:

• Use a certified digital identity service provider to conduct digital checks on any individual who has either a valid British or Irish Passport (or Irish Passport Card). The employer must still confirm that the individual presenting for work is the same as whose identity has been verified, which can be done via video call.
• Conduct an online check via the Home Office online service where an individual has been provided with an eVisa or is providing certain other documentation. An employer can also use the Employer Checking Service in specific circumstances, for example where an individual has an outstanding application or appeal with the Home Office.

Conduct in‐person manual document‐based checks, where the employer has to physically obtain, check and copy ‘acceptable documents’ from the prospective employee. It should be noted that a driving licence is not an acceptable document.

The Government has confirmed that it will issue further guidance in due course, and Build UK members are advised to identify who among their staff will fall within the extended right to work scope and start reviewing contracts and processes. Employers conducting right to work checks in accordance with the Home Office guidance will be provided with a ‘statutory excuse’, which protects them from liability if they are later found to be employing someone illegally. Without a statutory excuse, employers face significant penalties, which could be up to a maximum of £60,000 per worker.

The first three months of 2026 were a challenging opening to the year data from the CPA Construction Trade Survey has revealed.

Previous surveys had already shown a slowdown in demand over recent quarters and with persistent rain in January and February and the start of the Middle Eastern conflict pushing oil prices above $100 per barrel in March, there was a broad weakness evident in the construction supply chain.

Sales fell for product manufacturers and workloads were lower for both chartered surveyors and civil engineering contractors. Moreover, it was the first quarter that both heavy side and light side product manufacturers had reported a decrease in sales volumes since 2023 Q4, it was also the lowest balance for chartered surveyors and civil engineering contractors since the pandemic-hit quarters in 2020. This widespread decline points to a more broad-based fall in construction activity, with even infrastructure, which has been an area of growth in past surveys, unable to retain momentum against the Q1 headwinds.