Glenigan’s April Construction Index shows a sharp drop in project starts across all sectors, driven by global conflict, economic uncertainty, and falling investor confidence
Covering the three months to the end of March 2026, the seasonally adjusted data show that overall construction activity continues to decline, with on-site work starting down 17% compared to the previous quarter and 18% below 2025 levels.
Residential sector hit hardest
Project starts in the residential sector declined 13% on the quarter and dropped 30% compared to 2025.
Private housing activity fell 9% quarter-on-quarter and 34% year-on-year, while social housing starts decreased by 24% and 16% respectively.
Uncertainty around planning policy, alongside subdued buyer demand and cautious investors, continues to suppress development activity.
Mixed performance in non-residential construction
Office developments emerged as a notable bright spot, rising 37% compared to the previous quarter and standing 67% higher than a year earlier, supported in part by major schemes such as the 105 Old Broad Street project in the City of London.
Retail also recorded modest quarterly growth of 12%, though it remains 17% below 2025 levels.
Elsewhere, performance weakened significantly:
- Industrial starts fell 36% quarter-on-quarter and 31% year-on-year
- Health projects declined 16% and 13% respectively
- Community and amenity projects dropped 37% on the quarter
Hotel & leisure and education showed resilience on an annual basis, despite quarterly declines.
Civil engineering activity sees sharp decline
Civil engineering experienced the most severe contraction, with project starts down 37% compared to the previous quarter and 34% lower than last year.
Infrastructure activity fell 32% quarter-on-quarter and 37% year-on-year, while utilities dropped 42% and 30% respectively, highlighting a widespread slowdown in major works.
Regional performance uneven
London outperformed other regions, with activity rising 26% on the quarter and surging 69% year-on-year, driven largely by office developments.
Other regions showed mixed results. Northern Ireland and the North East recorded annual growth despite quarterly declines.
However, several areas saw significant downturns:
- The South West fell 47% on the quarter and 54% year-on-year
- The West Midlands dropped 37% and 39% respectively
- The South East declined 22% on the quarter and 27% annuallyp
Geopolitical tensions and economic weakness weigh on sector
According to Glenigan, a combination of global conflict and domestic economic fragility is intensifying pressure on the industry. Supply chain disruption and market volatility have been exacerbated by the ongoing US-Israel/Iran War, which continues to create uncertainty around energy prices and material costs.
Concerns over key trade routes, including the Strait of Hormuz and the Red Sea, are expected to prolong disruption through the remainder of 2026, further dampening project pipelines and delaying investment decisions.
Contractors and subcontractors are facing tightening margins as rising costs and stalled activity impact profitability.
Outlook
Glenigan’s Allan Wilen says: “Superficially, looks can be deceiving. A seasonal rise during the first quarter is masking a renewed weakening in project starts. All three main verticals: housing, non-residential buildings and civil engineering are considerably lower than a year ago and on the previous quarter on a seasonally adjusted basis.
“The sector is fighting on all fronts, home and abroad. Particularly, the Iran War will depress activity further near-term as private developers and house purchasers delay investment decisions due to fears of higher than anticipated interest rates, rising material costs, spiralling energy costs and stalled economic growth.
“It will have a knock-on effect on the non-residential verticals which, although many have ring-fenced funding, will no doubt be putting activity on hold to ensure they don’t waste budgets whilst rates spike.”
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