The Construction Products Association (CPA) has released its latest analysis, showing that expectations for the chancellor’s upcoming announcement are affecting delivery
Risk and uncertainty are at the forefront of the CPA Autumn Forecast, as it is expected that chancellor Rachel Reeves will announce tax increases next month.
The forecast now predicts measly rises in total construction output: 1.1% in 2025 and 2.8% in 2026, compared with the previous forecast’s 1.9% and 3.7%.
Activity has been on a decline since Spring
The CPA’s research has shown that confidence among homebuyers, owners, and investors is low, leading to a slowdown in activity. Private housing, infrastructure roads, and commercial new build offices, in particular, have been affected.
This is largely due to uncertainty caused by the Autumn Budget, which is expected to include tax rises and spending cuts. The budget is also coming late this season, on 26 November, meaning that the uncertainty will last longer.
Private housing is now forecast to rise by 2.0% in 2025 and 4.0% in 2026, down from the 4.0% and 7.0% previously predicted. This is bad news for the industry as a whole, as private housing is consistently the largest sector of construction, and this reflects falls in demand, and rising prices both for construction materials and for potential buyers.
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.”
The budget will be crucial
Writing for PBC Today earlier this month, Emma Ramell, director of external affairs at the Home Builders Federation, discussed how supporting first-time home buyers would be a crucial step to supporting the housebuilding industry, as a lack of buyers damages the industry’s ability to deliver.
Emma wrote: “One of the most significant challenges facing home builders is the worsening viability crisis, which is already stifling development and deterring investment in future sites across vast parts of the country.
“It is little surprise that viability has reached a breaking point. In recent years, home builders have been confronted with a growing array of new policy costs, taxes, and regulations. According to recent research by Zoopla, building new homes is now financially unviable across almost half (48%) of the country.”
She continues: “One area where the Government has consistently fallen short is in helping first-time buyers (FTBs) take that all-important first step onto the property ladder.
“For aspiring homeowners, the barriers keep mounting. Stretched affordability ratios, limited access to mortgage finance, and punishing transaction costs have combined to make home ownership an increasingly distant dream, particularly for those without family wealth to fall back on.
“The latest data from the Office for National Statistics, published in September, paints a bleak picture. In London, the average property is now unaffordable even to households in the top 10% of earners. Across the South East, South West and East of England, only those in the highest income decile can afford the average home.
“Unsurprisingly, without a realistic market for new homes, investment in new sites and labour is being limited. To overcome these challenges, the Government could provide assistance for first-time buyers at the Budget in the form of a new equity loan scheme part-funded by home builders.
“Not only would this generate positive outcomes for housing supply, home ownership and the wider economy by transforming demand into effective demand for new homes, but it would also give builders the confidence to invest for the long-term.”
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