Is the UK construction industry thriving or surviving?

Concerned about construction sector growth in the UK for 2025? You’re not alone.

Construction companies across the UK are expressing their concerns about the industry, citing economic uncertainty, rising costs, and persistent skills shortages.

While these concerns are balanced with some positive signs of future growth potential, the most pertinent question to answer is; is the UK construction industry growing?

What is the current landscape of the UK construction sector?

Between Brexit, the COVID-19 pandemic, and ongoing economic uncertainties, the current landscape of the UK construction sector has been determined by a challenging few years, but is the UK construction industry in decline right now?

While there’s plenty of reasons for cautious optimism, the data does suggest a decline in industry growth for 2025.

Based on the latest S&P Global UK Construction Purchasing Managers’ Index (PMI) figures (economic indicators obtained from monthly surveys of private sector companies), the industry achieved a value of 47.9 in May.

While values below 50 indicate industry contraction, decline was slower than in the previous few months and a distinct increase from the 46.6 value in April.

There are also discrepancies between the different subsectors of the construction industry.

For example, while the civil engineering segment of the construction industry remained in decline with a PMI value of 43.1 in April, residential work demonstrated resilience with an index of 47.1.

However, a number of factors are currently impacting the entire UK construction sector, among them:

Labour and skills shortages

The result of an aging workforce, the impact of Brexit, and a lack of interest from younger generations, the UK construction industry is facing significant labour shortages – especially for skilled worker and managerial positions.

This is according to the Home Builders Federation (HBF) and Barratt Redrow, the UK's largest housebuilder, as reported by the BBC.

Material costs, inflation, and supply chain challenges

Inflation (the Consumer Prices Index rose by 3.4% in the 12 months to May 2025, as reported by the Office for National Statistics) and supply chain issues are also playing a key role in challenging the UK construction industry right now.

While inflation has led to an increase in material and labour costs, supply chain disruptions (created by political and economic events, for example, the war in Ukraine) compounds these problems by creating further uncertainty over material availability and prices.

Impact of the housing market

Crucially, the relatively high interest rates in the UK (based on a 4.25% Bank Rate as of June 2025) have raised borrowing rates for developers, prospective homeowners, and house movers, thereby slowing housing demand and preventing new projects from starting.

Infrastructure investment and public sector projects

Owing to a lack of long-term planning and inconsistent policy shifts, there is growing uncertainty in the UK construction sector with regards to infrastructure investment and public sector projects.

This can complicate decision-making processes for investors and contractors, resulting in disputes and delays. 

For example, it was announced in October 2024 that Phase 2 of Britain’s high-speed railway HS2 was cancelled, scaling back the railway to a line between London Euston and Birmingham Curzon Street.

What lies ahead for the construction industry in the UK?

Technological developments that drive future growth

From the widespread adoption of artificial intelligence (AI) to computer modelling, drone usage and even 3D printing, the world is currently experiencing an industrial revolution – one that leaves no industry untouched, including construction.

While it’s true that AI isn’t going to replace employees laying bricks or erecting scaffolding, The Boston Consulting Group predicts that by 2025, up to 30% of construction work could be automated, as reported by Construction Today.

Greater focus on sustainability

Although an increasing focus on sustainability and environmental standards can have a knock-on effect on construction project costs as companies adapt their processes, materials, and methods to meet these requirements, it’s crucial that companies work towards net-zero construction.

This is in line with the government's Net Zero Strategy which aims to decarbonise all sectors of the UK economy to meet the net zero target by 2050.

Key benefits for construction companies include long-term cost savings, enhanced market competitiveness, and improved brand reputation. 

Adoption of modern construction methods

Linking both digital technological developments and sustainability is modern construction methods, such as BIM (Building Information Modelling) and prefabricated or modular construction methods that take place off-site.

By adopting this more modern approach to construction, UK builders and contractors can take advantage of increased efficiencies and reduce the amount of waste they produce.

Thriving or surviving - what’s the verdict?

While there’s undoubtedly important challenges facing UK construction in 2025, there’s still plenty of potential for the industry to not just survive but thrive – in the right conditions.

By adopting a more sustainable approach, embracing modern construction methods, and incorporating the latest technological advancements into their operations, UK construction businesses can ensure they’re well prepared for the future – no matter the course it takes.

Although making these adjustments typically requires significant time, effort, and investment, they’re essential to helping UK construction companies navigate industry challenges.

Move forward with Kingsmead Consultants

During times of uncertainty within the UK construction industry, it’s never been more important for builders and contractors to minimise risks, keep projects within budget, and finish on the designated completion date.

That’s where Kingsmead Consultants comes in.

Our experienced team of RICS-regulated chartered quantity surveyors provide a wide range of vital services including preparing accurate cost estimations, detailed forecasts, and valuations, while also ensuring contract compliance, positive negotiation outcomes, and expert management of on-site variations.

Choosing to partner with Kingsmead Consultants has many benefits for your contracting company in the North West, such as reduced risk, greater efficiency, and stronger margins, so why not speak to our professional team today?

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