CPA predicts gradual recovery in 2025

The Construction Products Association (CPA) has released its Winter forecasts, projecting a gradual recovery for the UK construction sector over the next two years.

After a challenging period, construction output is expected to grow by 2.1% in 2025 and 4.0% in 2026. While this marks an improvement, the recovery is slower than initially predicted, with factors such as higher inflation and fewer interest rate cuts influencing the outlook.

Private housing, the largest construction sector in the UK, faces a slower recovery in early 2025, partly due to higher mortgage rates at the end of 2024. The rate of recovery will depend largely on how quickly mortgage rates drop, as well as the success of the key Spring selling season.

“Private housing output is forecast to rise by 6.0% in 2025 and 8.0% in 2026, but risks remain in the short term, especially in the first half of this year,” said Rebecca Larkin, head of construction research at the CPA. Challenges such as water and nutrient neutrality requirements and changes in building regulations continue to add cost and complexity for housebuilders.

In the private housing repair, maintenance, and improvement (rm&i) sector, growth is expected to pick up in the second half of 2025. A combination of rising house prices and continued demand for energy-efficiency retrofits, such as solar panel installations, is expected to drive this growth. Output in this sector is forecast to rise by 3.0% in 2025, with further growth of 4.0% in 2026.

The infrastructure sector, the third-largest in construction, continues to benefit from major projects like Hinkley Point C and HS2. The wind farm sector is also growing, along with a planned £500 million boost for pothole and road maintenance. However, the cancellation of five major road schemes could limit overall growth in this area. Infrastructure output is expected to increase by 1.4% in 2025, with a more substantial rise of 4.1% in 2026.

Larkin added, “The recovery is set to be more gradual than previously anticipated, but there are areas of growth, particularly in energy-efficiency improvements and large infrastructure projects. The government’s role in long-term funding and investment will be crucial to sustaining recovery.”

With ongoing challenges, including inflation and regulatory changes, the construction sector is expected to move towards recovery as the year progresses, driven by government investment and shifts in housing demand.