The latest Construction Products Association (CPA) forecast paints a gloomy forecast for 2026, predicting UK private housing output could fall by 7% in 2026.

Overall, the CPA says in its Spring Forecast (released on May 1), that UK construction activity is expected to contract 2.5% in 2026. The latest figures are a sharp, unprecedented downward revision from the CPA’s predictions last year and partly reflect continuing economic uncertainty and impacts on energy costs stemming from the Middle East conflict.

“Indirectly, however, increases in inflation across the economy will also hit confidence and spending or investment from potential homebuyers, homeowners, businesses, clients and investors,” the CPA says.

“As a result, the largest construction impacts over the next 12-18 months are likely to be on private housing and private housing RMI.”

The CPA says impacts from the Middle East conflict and its potential impacts on the UK economy and construction industry are expected to hit construction activity over the next 12-18 months.

The second half of 2026 was seen at the start of this year as offering hope for a housing sector turnaround, but the latest CPA commentary will be further confirmation what many merchants, manufacturers, importers and distributors across the timber and building product sectors have been sensing for the past couple of months – that economic recovery will be further down the road than hoped for.

“It appears increasingly likely that the second half of this year will see both a drop in construction demand and sharp cost increases, especially in the two largest sectors, private housing and private housing repair, maintenance, and improvement (rm&i),” the CPA added.

“Construction output is now expected to fall by 2.5% in 2026 and although output is still expected to rise by 1.2% in 2027, the risks remain heavily on the downside.”

CPA head of construction research Rebecca Larkin said the direct impact on construction will be double-digit construction product price inflation, especially in oil-based products and energy-intensive products,

Growth is still expected in infrastructure despite the uncertain cost environment.

The CPA says the private housing sector saw stronger housebuilder activity in March and April. This is likely to be the case until July, and the key concern is what happens to demand then as higher mortgage rates are factored into purchasing decisions.

In addition, housebuilders will have to contend with sharp cost increases that will exacerbate site viability issues,

The CPA expects private RMI work to be subdued over the next 12-18 months as homeowners adopt a ‘wait-and-see’ approach as they see household bills and the cost of home improvement projects both rise. Overall, private housing RMI output is forecast to fall by 8% in 2026 and remain flat in 2027.

There is still expected to be significant growth in infrastructure, the third-largest construction sector, given longer-term existing contracts, pipelines of activity and funding in place for future projects. This is particularly the case in energy generation and distribution work, as well as in the water sub-sector.

Potential upsides include if the government provides stimulus for housebuilding and home improvement. In addition, the government may help construction by reducing its extensive list of cost burdens on the industry, which are set to increase further near-term given the government’s new 50% import tariff on steel products in July, its Building Safety Levy in October and its Future Homes and Building Standards from March 2027.

The CPA says its latest forecasts depend heavily on how long the global disruption and high oil and energy prices stemming from the Middle East conflict last.

“Even if the disruption were to end today, a degree of damage has already been done, given the adverse effects of spikes in oil, industrial energy and product manufacturing costs. The CPA assumes four months of disruption, with lagged impacts over the next 12-18 months that culminate in an overall decline in construction activity.”

Source: ttjonline.com