UK construction output fell by 1% in the three months to August 2026, according to the latest Office for National Statistics data
The decrease marks the second consecutive decline in the three-monthly series of construction output, indicating there could be a grim future ahead for the industry.
The decrease was driven by falls in both new work and repair and maintenance, which declined by 1.4% and 0.3%, respectively.
“The construction industry could certainly benefit from some good news, but has been afforded no such encouragement by a decrease in today’s construction output statistics,” stated Richard Cook, senior director of economics at Pegasus Group.
“While not entirely unexpected given the industry’s seasonal summer slump, the latest fall continues a trend of fits and starts. The UK economy has been resilient: we have seen GDP growth, despite all the doom and gloom.
“But construction is a key driver of the UK economy, and we need sustained sector growth to translate into a nationwide boost.”
5 of the 9 construction sectors reported a decline
At the sector level, five of the nine construction sectors recorded a decline over the three-month period, with private new housing making the largest negative contribution, falling by 3.2%.
Neil Leitch, managing director of development finance, Hampshire Trust Bank, commented: “The government is understandably keen to get more people onto the housing ladder, but there is a concerning disconnect between the ambition to stimulate demand for new homes and what is happening across the construction industry.
“Encouraging more people to buy new-build homes is one thing, but developers also need to be able to meet that demand.
“That requires a consistent pipeline of viable schemes and sufficient confidence for developers to commit capital and start building. Now, there simply isn’t enough of either.”
August marks the fourth consecutive monthly decrease
Monthly construction output also declined, falling by 0.2% in August. This marked the fourth consecutive monthly decrease in construction output.
The August decrease was driven entirely by a 0.7% contraction in new work. In contrast, repair and maintenance output increased by 0.4% over the month.
The continued declines in both the monthly and three-month series highlight ongoing weakness in construction activity, particularly in the private new housing sector.
Clive Docwra, managing director of property and construction consultancy McBains, said: “Once again, private housing is a significant negative outlier, with a 3.2% decrease over the three-month period and a 1.9% decline in August. The cost of borrowing for homebuyers remains high, which is affecting housebuilding.
“While the government recently announced a scheme to help first-time buyers, the industry will hope for more incentives in the upcoming Budget to stimulate the market among other buyers as well.”
Rising energy costs could be to blame
Neil Pein, CEO of BNP Paribas Leasing Solutions, said rising energy prices from conflict around the world have played a major role in the decline in UK construction output.
“Rising energy costs are not a new challenge for the construction sector, but the pressure they’re creating is becoming increasingly difficult to absorb, and against that backdrop, it’s perhaps unsurprising to see output fall.”
“One interesting knock-on effect of rising energy prices is that construction companies are having to rethink their equipment strategies. As an asset-intensive industry, plant and machinery sit at the heart of project delivery, but owning equipment outright can tie up significant amounts of capital.”
He continued: “That can become a problem in a more unpredictable environment as project pipelines become harder to forecast, and firms risk spending large sums upfront on equipment they may not use consistently.”
September’s construction output might offer some hope for improvement
Matthew Cook, managing partner at Goodman Jones, explained: “Although the latest ONS figures show a further decline in construction output in August, more encouraging signs of activity in September offer grounds for cautious optimism.
“While weaker private housing activity has weighed on overall output, modest increases in infrastructure and private commercial work in August are encouraging. Significant work remains available across the sector, reinforcing the need for contractors to focus on securing profitable projects.”
