The Construction Products Associations (CPA) has substantially revised its forecasts downwards amid growing risks and uncertainty surrounding the governments impending tax rises in the Autumn Budget and their impact on the wider UK economy.
The CPA’s Autumn Forecasts show total construction output is now only forecast to grow by 1.1% in 2025 and 2.8% in 2026, which is a significant revision down from the 1.9% in 2025 and 3.7% in 2026 in the previous forecast.
Firms from across the construction supply chain are reporting that activity has slowed since the Spring, particularly in private housing, infrastructure roads, and commercial new build offices. Confidence among homebuyers, homeowners, and investors is weak; this has been exacerbated by uncertainty over the upcoming Autumn Budget and who will bear the brunt of the inevitable tax increases and potential spending cuts.
The CPA has taken account of the pre-Budget uncertainty in its latest forecasts but, like all economic forecasters, will not be able to take account of the tax rises and spending cuts until they are confirmed on 26 November.
In private housing, which is the largest sector of construction, output is forecast to rise by 2.0% in 2025 and 4.0% in 2026, a revision down from the previous forecast of 4.0% in 2025 and 7.0% in 2026. After large falls in demand between 2022 and 2024, house builders continue to highlight that demand and affordability remain the biggest challenges in areas of the country where house prices are higher, even as interest and mortgage rates have fallen.
In private housing repair, maintenance and improvement (rm&i), despite sustained real wage growth, many households have continued to save. The CPA said a sustained recovery in private housing rm&i will only occur when homeowners felt confident enough to commit to large, discretionary spending such as home extensions and renovations.
It says this is unlikely to be before the Autumn Budget, given uncertainty over whether households will face tax increases, which suggests a recovery from Spring 2026 at the earliest.
“The effects of pre-Budget uncertainty are being felt now but the impact of the Budget tax rises will be felt most strongly as we head into 2026,” said CPA Head of Construction Research, Rebecca Larkin.
“Currently, the forecast is for 2.8% growth in construction output next year, primarily driven by public sector construction, infrastructure and house building. However, the extent of the government’s tax rises and spending cuts, and who bears the brunt of them, will heavily determine whether 2026 is a year of growth or contraction for the industry.”
