UK Market View: Q2 2026

The UK construction sector enters the second half of 2026 facing a complex balancing act. While recent public investment commitments and a resilient repair and maintenance market continue to support activity, rising material costs, political uncertainty and subdued new work output are creating fresh challenges for clients across the built environment. 

Our latest UK Market View explores the changing market conditions shaping project delivery and investment decisions, highlighting the risks and opportunities that organisations should be considering as they plan for the years ahead. 

Rising cost pressures return

After a sustained period of stability, construction material prices are once again becoming a key concern. Annual material price inflation has risen to its highest level in three years, with increases now outpacing broader consumer inflation. Steel products have experienced the most significant pressures, driven by ongoing geopolitical disruption and the introduction of the UK's new steel tariff and quota system. 

The implications extend beyond material costs alone. Increased price volatility, uncertainty around future supply and changing procurement dynamics could all have a significant impact on project viability and delivery programmes. For many clients, navigating these risks will require greater scrutiny of procurement strategies and earlier engagement with supply chains.

Activity slows while competition intensifies

At the same time as costs are rising, overall market activity remains subdued. Construction output growth has been supported largely by repair and maintenance work, while all new work output continued to decline in the first quarter of 2026. New orders also fell sharply, reflecting broader economic uncertainty and reduced confidence among investors and developers. 

As competition for projects increases, some contractors may be tempted to pursue aggressively priced tenders in order to secure workload. While this can appear attractive from a client perspective, it brings additional commercial risks. Inflationary pressures, supply chain challenges and changing market conditions can quickly erode margins, increasing the likelihood of disputes, financial stress and delivery issues later in the project lifecycle. 

Uncertainty creates both risk and opportunity

The report also considers the impact of wider political and market developments, including the UK's change in leadership, proposed reforms to retentions and the potential consequences of new steel import policies. Together, these developments are contributing to an increasingly uncertain operating environment for the sector. 
 
However, there are still reasons for optimism. Long-term infrastructure investment remains significant, public sector spending commitments continue to support future pipelines, and the easing of oil prices may help reduce some inflationary pressures if sustained. 

In this environment, success will depend on informed decision-making, robust commercial controls and transparent engagement across the supply chain. Organisations that actively monitor market conditions and adapt their strategies accordingly will be best placed to manage volatility and unlock value from their programmes and projects. Download the full report to explore Mace Consult's latest analysis, market forecasts and recommendations for navigating the evolving construction landscape.