The Construction Products Association has released their latest forecast, with figures taking an expected downturn following global events
The CPA Spring Forecast 2026 is pessimistic, expecting construction activity to contract by 2.5% this year, a further decline from the previous forecast.
The major event causing this prediction is the escalation of the conflict in the Middle East.
Construction activity is likely to suffer this year
The CPA forecast indicates that over the next 12-18 months, both the economy and the construction industry will see a decline in demand and a rise in costs, especially in the second half of 2026.
Output is expected to fall 2.5% this year, but is also expected to rise again by 1.2% in 2027. Private housing is predicted to remain strong until July, as higher rates of cost congregate, and activity will likely fall then. Overall, private housing is expected to fall 7% this year and not rise in 2027. This is concerning, as the sector is the largest in the UK construction industry.
The second-largest sector, private housing repair, maintenance, and improvement (rm&i), is also set to see a fall in demand due to uncertainty among homeowners. Project costs will rise, as will average homeowners’ bills, leading to a sharp 8% fall this year and no growth next year.
On the flip side, infrastructure is still expected to see growth, as contracts and activity pipelines have pre-existed for longer, and funding is already in place for many major projects, especially in energy generation and distribution and in the water sub-sector. Overall infrastructure output is expected to rise by 3.2% this year and 3.4% next year.
“Damage has already been done”
CPA head of construction research, Rebecca Larkin, said: “At the start of this year, there was a degree of cautious optimism over the outlook for construction activity in 2026 and 2027 across most sectors. However, this has been replaced by stark concerns over global factors and oil and industrial energy cost rises, leading to a spike in inflation. The direct impact on construction will be double-digit construction product price inflation, especially in oil-based products and energy-intensive products, where UK industrial energy prices can account for up to one-third of total costs for manufacturers. Indirectly, however, increases in inflation across the economy will also hit confidence and spending or investment from potential homebuyers, homeowners, businesses, clients and investors. As a result, the largest construction impacts over the next 12-18 months are likely to be on private housing and private housing rm&i.
“Public and regulated sectors are expected to be less affected by rising costs due to strong pipelines of activity in some areas, such as energy and water infrastructure. In addition, infrastructure clients may be more understanding of sudden cost rise issues. However, if not, these sectors may also suffer from project viability issues and contractors’ unwillingness to sign up to large projects in an uncertain cost environment, given the increasing risk.
“Risks to the forecasts are heavily skewed to the downside, given the uncertainty over the extent of cost rises and their impacts on confidence, spending and investment. However, there are potential upside risks if the government provides stimulus for house building and home improvement. In addition, the government may help construction by reducing its extensive list of cost burdens on the industry, which are set to increase further near-term given the government’s new 50% import tariff on steel products in July, its Building Safety Levy in October and its Future Homes and Building Standards from March 2027.
“Clearly, as with all current economic forecasts, the CPA’s latest forecasts depend heavily on how long the global disruption and high oil and energy prices stemming from the Middle East conflict last, which remains highly uncertain. Even if the disruption were to end today, a degree of damage has already been done, given the adverse effects of spikes in oil, industrial energy and product manufacturing costs. The CPA assumes four months of disruption, with lagged impacts over the next 12-18 months that culminate in an overall decline in construction activity.”
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