At a Glance
💰 UK construction output is forecast to grow at 3.77% annually to 2031, with market size rising from about USD 325bn today to nearly USD 392bn.
⚙️ Financial distress remains acute, with almost 4,000 insolvencies in the past year and more than 102,000 firms at risk despite a slight easing late in 2025.
🚆 Infrastructure is the fastest-growing segment, projected to expand at around 7.9% a year to 2031, underpinned by HS2, Hinkley Point C and offshore wind investment.
🏛️ The Building Safety Levy, remediation reforms and product regulation plans are converging into a major compliance shift from 2026 onwards.
🌱 Energy policy in 2026 centres on a bigger offshore wind budget, a £28bn grid upgrade package and new hydrogen and carbon capture schemes moving into delivery.
Today’s update: the data points to a construction market that is growing on paper but still contracting on the ground, as demand for infrastructure and energy schemes runs into persistent financial and regulatory pressures. Forthcoming building safety and energy reforms will add complexity just as firms navigate high input costs and rising compliance duties. Here’s what you need to know to stay ahead today.
Ongoing Stories
Following earlier coverage of the UK’s £530bn construction pipeline and skills pressures, new market analysis shows the sector still in contraction on PMI data, with January 2026 marking a 13th straight month below the growth threshold despite a modest improvement in sentiment.
Returning to the theme of construction sector fragility and recent contractor failures, fresh insolvency figures confirm 3,950 collapses over the past year and a 14% year-on-year rise in firms in financial distress, even as insolvency rates eased slightly towards the end of 2025.
Building on recent scrutiny of regulatory reform, today’s material sets out timelines and scope for the Building Safety Levy, remediation legislation and construction products regulation that will reshape risk allocation and compliance from 2026 onwards.
Continuing our focus on energy infrastructure and grid constraints, new 2026 horizon scanning details how an expanded offshore wind CfD budget, Ofgem’s £28bn networks package and emerging hydrogen and CCS projects will feed further infrastructure workload into an already stretched supply chain.
Top 5 Headlines
💰 UK construction market set to reach nearly USD 392bn by 2031
New forecasts estimate the UK construction market at around USD 325.33bn in 2026, with annual growth of 3.77% taking it to about USD 391.45bn by 2031. Private capital provides roughly 75% of investment, heavily concentrated in rental housing, logistics and commercial real estate, while residential accounts for 38.1% of sector revenues. Infrastructure is expected to be the fastest-growing segment, with a projected 7.9% CAGR through 2031. For contractors and investors, this points to a medium-term growth runway led by infrastructure and living sectors, even as short-term trading conditions remain tight. (Source: Mordor Intelligence)
⚙️ Construction downturn eases but PMI remains in contraction
The UK construction Purchasing Managers Index rose to 46.4 in January 2026 from 40.1 in December 2025, signalling a slower pace of decline but still below the 50 growth threshold for the 13th consecutive month. Commercial work is seeing the weakest rate of contraction, housebuilding remains the softest segment but is showing marginal improvement, while civil engineering continues to fall sharply. Purchasing costs climbed steeply on the back of wage and raw material inflation, even as delivery times improved for the sixth month in a row and output fell 1.1% in the three months to November 2025. For project teams, this mix of easing supply constraints and persistent demand weakness suggests continued tender competition and pressure on margins. (Source: Investing.com; GOV.UK)
💰 Construction insolvencies high despite late-2025 easing
Latest analysis shows 3,950 construction insolvencies in the past year, representing 17% of all UK corporate failures, alongside a 14% year-on-year increase in the number of construction firms in financial distress to more than 102,000. While insolvency rates eased in November 2025, underlying stress is being driven by fixed-price contracts, elevated input costs and financing challenges. Returning today to the sector resilience theme, these figures underline counterparty risk across the supply chain and the need for tighter due diligence and more flexible commercial models on long-duration projects. (Source: Bishop Fleming)
🏛️ Building safety regime to tighten from 2026
The Building Safety Levy is due to take effect on 1 October 2026 for new residential and student schemes in England, aiming to raise £3.4–3.5bn over ten years to fund unsafe cladding remediation, with exemptions for small developments and a direct link between payment and completion certificates. Alongside this, a Remediation Acceleration Plan and Bill is being prepared to enforce remediation deadlines by 2029, strengthened landlord duties are in train, and a Construction Products Reform White Paper sets out a path towards a single regulator by 2028–29. Interim findings from the Building Safety Regulator’s Fundamental Review are expected in spring 2026, with further tailored regulation coming in Wales from July 2026. The package will materially increase compliance obligations, timelines and potential liabilities for developers, landlords and product manufacturers. (Source: Herrington Carmichael; RWK Goodman; GOV.UK)
🌱 £28bn grid upgrade and expanded offshore wind budget reshape energy workload
The Department for Energy Security and Net Zero has increased the offshore wind Contracts for Difference budget by £890m, supporting projects including schemes led by Equinor, Ocean Winds and others such as Pentland FLOW. Ofgem is backing a £28bn investment package in electricity networks and a national “supergrid” initiative, while NESO’s new 25-year Centralised Strategic Network Plan and 11 Regional Energy Strategic Plans are being rolled out with £27.8bn in price-controlled funding to 2031. Hydrogen production contracts (HAR1) have been signed, with a HAR3 auction due in 2026, and carbon capture and CO₂ network projects such as HyNet, plus heat network zoning and corporate PPA reforms, are progressing. For infrastructure and energy contractors, this represents a major multi-year programme of grid, generation and hydrogen work, but will intensify competition for skills and manufacturing capacity. (Source: Walker Morris; Slaughter and May; CCGroup)
🏗️ S106 affordable housing roadmap aims to unblock stalled schemes
Government has set out a roadmap to support Section 106 affordable housing delivery in response to market weakness, including a new emergency tenure change process local authorities must use where Registered Providers decline uncontracted homes to avoid schemes stalling. Up to 10% of a £2.5bn low-interest loan fund for Registered Providers will be ringfenced to underpin S106 delivery, with potential expansion of private investment mechanisms, and tenant transparency will be increased by extending Freedom of Information rules to some Tenant Management Organisations. Consultation on the package closed on 3 March 2026. For developers and social landlords, the measures could ease delivery risk on mixed-tenure schemes but will come with tighter oversight and reporting expectations. (Source: GOV.UK)
Also in the news
🏗️ UK house prices are forecast to grow around 2% in 2026, with regional variation from 1.8% growth in the North East to a slight 0.8% fall in the South East, as easing mortgage rates and steady wages support modest demand. (Source: Homeowners Alliance)
🏗️ Prime London residential markets are seeing renewed buyer confidence following the Budget, reflected in higher-value transactions and an uptick in new instructions. (Source: Black Brick)
🏛️ Ongoing regulatory reform includes new qualifications for electrical work, including EV charging and solar installations, pointing to rising competency requirements on low-carbon projects. (Source: PBC Today)
🏛️ The Building Safety Regulator’s Fundamental Review interim report, due in spring 2026, is expected to propose further fire safety and licensing changes, with tailored building safety rules in Wales to follow from 1 July 2026. (Source: RWK Goodman)
🌱 Government consultations on corporate Power Purchase Agreements close on 6 March 2026, aiming to encourage long-term renewable energy contracts and support decarbonisation across large energy users. (Source: CCGroup)
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