Factors cited by the Federation include geopolitical uncertainty, subdued consumer confidence and weak economic conditions. The much weaker-than-anticipated start to the year, due to poor weather in January and February, compounded by the ongoing effects of conflict in the Middle East were highlighted.
New housing and home improvement projects have been adversely affected by subdued consumer confidence, which has weakened demand over a sustained period, says the BMF.
“With housebuilders also facing increased costs that are exacerbating site viability, output is expected to fall further in 2026 as they await greater certainty about the economic outlook,” it said.
A permanent resolution to the conflict in the Middle East could help, it added, with a new Memorandum of Understanding having been agreed by the US and Iran on June 14.
The BMF’s baseline forecast expects market conditions to deteriorate as the year progresses, with the conflict’s knock-on effects feeding into the UK economy.
It is, however, tempered by lower and upper forecast scenarios of -3.2% and +1.1% – the latter requiring government stimulus to reignite key market areas, including housebuilding and domestic RMI.
“Construction is one of the most vulnerable areas of the economy, with elevated levels of business distress and insolvencies highlighting the challenges facing many firms,” said John Newcomb, CEO of the BMF.
“It comes as no surprise that businesses are growing more cautious. Recent activity indicators point to a sector that continues to struggle to gain momentum, with weaker workloads, delayed project starts and ongoing concerns about future demand.
“For the building materials sector, these conditions have created a challenging trading environment. Demand has remained under pressure across several key product categories, particularly those linked to new housing activity, where the rising cost of materials is outpacing UK inflation.”
The BMF Forecast combines a comprehensive analysis of merchant market performance, drawn from its Builders Merchants Building Index, produced monthly and regarded as the key indicator of current RMI activity, with an examination of key factors affecting builders’ merchants to project future sales.
While trading conditions are expected to be difficult in the short term, the BMF forecast, looking further ahead, retains a degree of optimism for a gradual recovery in the latter half of 2027, anticipating potential growth of +1.7% for the whole year.
