UK Market View: Q3 2026
Devolution promises opportunities as construction challenges mount
Key takeaways
1.0%
Construction output decline in the three months to August
11.8%
Fall in new orders in Q2, the third consecutive quarterly decline
6.4%
Construction material price inflation in August, the highest since March 2023
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The UK construction market is entering a period where opportunity and delivery risk are moving in parallel. Devolution, planning reform and changes to methodology behind public sector appraisals could unlock stronger pipelines across housing, transport and public services. However, subdued construction activity, falling new orders and renewed cost pressures continue to create a challenging environment for project delivery.
Our latest UK Market View explores how these changes could shape investment across the country and what clients and local authorities should consider as they look to turn emerging opportunities into successful projects and programmes.
Market pressures continue to build
Construction output declined by 1.0% in the three months to August and is 1.6% below its level a year ago. All new work has declined by 5.0% over the past 12 months. New orders fell by 11.8% in Q2, marking the third consecutive quarterly decline, as fragile confidence, borrowing costs and viability challenges continue to hold back investment.
At the same time, construction material price inflation reached 6.4% in August, its highest level since March 2023. Renewed energy price pressures are contributing to higher costs, creating a difficult balance between weaker demand and rising input prices. In response, our 2026 tender price inflation forecasts remain unchanged at 3.5% for national real estate, 4.5% for national infrastructure and 3.5% for London.
Can devolution unlock new opportunities?
Against this backdrop, greater devolution could give local leaders more control over housing, transport, regeneration and public services, helping to create stronger regional construction pipelines. Changes to local funding arrangements and greater control over major local transport projects could also give authorities more influence over where and how investment is directed.
However, translating greater powers into construction activity will take time. Funding certainty, local delivery capability and effective coordination between central and local government will be critical if policy ambition is to translate into projects on the ground.
Turning ambition into delivery
Planning and infrastructure reforms could provide further opportunities. Changes to the National Planning Policy Framework aim to support housing delivery in well-connected locations, while a reduction in the government’s discount rate from 3.5% to 3.0% should make projects with longer-term benefits easier to approve.
Unlocking projects will depend on more than policy reform. In a market facing continued cost, viability and supply chain pressures, clients and local authorities will need clear funding, realistic programmes, robust due diligence and early commercial engagement.
Those that combine ambition with disciplined decision-making will be best placed to manage volatility, improve delivery certainty and capitalise on the opportunities ahead.
Download the full Q3 2026 UK Market View to explore our latest analysis, forecasts and insights.
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Your questions answered
What is the outlook for the UK construction market in Q3 2026?
The market presents a mixed picture. Devolution, planning reform and changes to infrastructure appraisal could support future housing and infrastructure pipelines. However, falling new orders, subdued output, high borrowing costs and construction material price inflation continue to affect project viability and delivery confidence.
How could devolution affect UK construction activity?
Greater local control over funding, transport, housing and regeneration could help local leaders develop stronger pipelines that reflect regional priorities. However, the construction impact will depend on funding certainty, local delivery capability, effective planning and alignment between local and central government decision-making.
Why are construction material prices increasing?
Construction material price inflation reached 6.4% in August following renewed increases in energy costs. Construction products are particularly exposed to oil, gas, fuel and transportation prices, meaning large movements in energy markets can feed through rapidly into the cost of materials.
Why are falling new orders significant for the construction sector?
New orders provide an indication of future workloads. Their third consecutive quarterly decline suggests contractor pipelines may become slimmer and competition for available work could intensify. However, clients should continue to assess whether competitive tender prices realistically reflect inflation, scope and delivery risk.
How can clients respond to the current market conditions?
Clients can improve project certainty through realistic programming, early commercial and supply-chain engagement, robust cost planning and thorough supplier due diligence. Ongoing market testing can also help organisations understand whether tender proposals adequately reflect inflation, capacity and project-specific delivery risks.
How can Mace Consult help clients respond to the current UK construction market?
Mace Consult can help clients and local authorities navigate changing market conditions and turn emerging opportunities into successful projects and programmes. With continued pressure on costs, viability and supply chains, early commercial engagement, realistic programmes, robust due diligence and clear delivery strategies can help improve certainty and manage risk.