The Office for National Statistics estimates that construction output fell by 0.7% in quarter 3 compared with quarter 2
The main culprit for this decrease in construction output was private new housing, which fell by 4.7%, according to the latest ONS stats.
Despite a late rebound of growth in September, five of the nine construction sectors recorded falls over the quarter.
Neil Leitch, managing director of development finance at Hampshire Trust Bank, explained: “A fall in private housebuilding output is another reminder of the difficult conditions facing developers.
“The concern isn’t simply that fewer homes are being built today, but that the pressures behind these figures are also making it harder for housebuilders to commit to their next projects, particularly SME developers who are being squeezed on several fronts.”
What contributed to the September increase in construction output?
Both parts of the sector contributed to the September rise. New work grew by 0.9% and repair and maintenance by 0.6%. Infrastructure new work, which rose by 3.3%, was the main driver of the increase in new work.
Total construction new orders grew by 1.2%, or £107 million, in the third quarter compared with the previous three months. The increase came mainly from public other new work and private commercial new work.
Moreover, construction output prices rose at an annual rate of 3.2% in the 12 months to September 2026.
However, Clive Docwra, managing director of McBains, warns that the industry shouldn’t celebrate yet. He commented: “After a series of four consecutive disappointing monthly returns, September’s figures will be welcomed by the industry. However, the sector is still playing catch-up given that output fell over the third quarter of the year.
“While it’s encouraging that there was an uptick in new work orders in September, especially in infrastructure, longer-term worries over housebuilding rates – which fell by 4.7% between July and September – remain.
“So nobody will be celebrating too much yet, especially as increasing build costs remain across the industry as a consequence of domestic and international factors. As our recent analysis of the market found, competitive tendering is helping constrain price growth, but all these elements mean the industry is bracing itself for a challenging winter.”
How can Budget announcements support future construction growth?
Those in the industry recognise the small steps taken to support construction in the Autumn Budget, but argue it needs to go further to see any real growth in construction output.
“The Autumn Budget was certainly a ‘steady-as-she-goes-Budget’, but the construction sector now needs to see more courageous, impactful change. Development viability challenges are not sustainable, particularly in London, and developers need the confidence to build; otherwise, we won’t see meaningful growth in construction starts,” said Richard Cook, head of economics at Pegasus Group.
“Sustained growth in the construction sector needs to be backed up by addressing skills shortages: government efforts to address construction education are well-intended, but as yet there has been little progress in improving the situation when it comes to attracting more people to work in the sector.”
Matthew Cook, managing partner, Goodman Jones, added: “The Budget provided some support, including an additional £1.5bn for the Social and Affordable Homes Programme and £4.7bn for the Your First Home scheme.
“However, these measures are unlikely to have a meaningful impact before 2027, offering little immediate relief. For now, construction remains a tale of two sectors: relative resilience in infrastructure for disciplined businesses, but a much tougher outlook for residential development.”
