UK market view: Q3 2025

Construction output rose by 1.2% in Q2, the strongest performance since 2022. Infrastructure continues to lead the way, supported by public investment and policy reform. While the outlook is improving, the market remains cautious beneath the surface.

New orders dipped in Q2, and labour market indicators are softening. Inflationary pressures are also complicating the picture. The Q3 edition of our Market View explores these dynamics in detail, highlighting what’s driving growth, where risks remain, and how clients can respond.

Infrastructure output grew by 3.2% in Q2 and is now 5.5% higher than a year ago. Public non-housing and private industrial sectors also posted strong annual gains. However, new orders fell by 8.3%, and supply chain partners are reassessing commitments amid delivery uncertainty.

Skills shortages and contractor caution are limiting capacity. Clients may need to look further afield to secure delivery partners. Early market engagement and strategic positioning will be key to unlocking opportunities.

Private housing output rose 5.7% over the past year, helping to offset a sharp decline in public housing. But London faces deeper challenges: housing starts in the capital have dropped by over 67%, driven by Gateway 2 delays and viability concerns.

As the sector recovers, inflationary pressures are likely to return. Clients should anticipate cost implications and engage early to secure capacity. Consumer price inflation reached 3.8% in August. Interest rate cuts are slowing, and the Bank of England is signalling caution. Construction pay growth has eased to 3.9%, but persistent skills shortages may drive wages higher.

Higher inflation could delay investment and increase tender prices. The Autumn Budget will be a key moment for the sector, particularly for housing and infrastructure. Our Q3 2025 Market View offers a comprehensive look at the UK construction landscape. From output trends and inflation forecasts to policy updates and sector-specific insights, it’s essential reading for anyone navigating the built environment.