Residential sector continues to lag behind as wider construction industry battles persistent economic challenges

New research from Glenigan finds that construction remains markedly lower than pre-Pandemic levels as the challenging economic landscape persists.

The latest Construction Index, which looks at the three months to the end of February 2026 and covers all underlying projects with a total value of £100million or less, shows that the value of work over the period declined by 10% year-on-year, and remains 15% below 2025 levels.

Glenigan says that this is largely a result of the residential construction sector’s performance, where the value of starts on-site fell by 20% and by almost a third compared to 2025 figures.

Private housing declined by 22% against the preceding three months and by 36% against the previous year. Whilst housing affordability has improved over the last year, as household incomes have outpaced house price inflation and interest rates have eased, this has yet to lift new house sales. Glenigan says that developers remain reluctant to open up new sites until demand strengthens and are focused on securing sales on existing sites. Furthermore, slow BSR approval of developments and wet ground conditions over the last three months have hampered project starts.

Social housing also declined 16% against the preceding three months and by 14% against the previous year, largely attributed to the long-term impact of cuts to grant funding. However, the report says that improved government support is expected to brighten sector prospects as the next Spending Review period commences from April.

However, non-residential construction saw more positive data, with office construction continuing on an upward trajectory that began in late 2025. Glenigan says that this is largely driven by a flurry of data centre construction, and starts rose by 40% during the period to finish 45% higher than the previous year.

Hotel & leisure results were strong, rising by 28% against the preceding three months to stand 17% up against the previous year, with the £71million Kings Hall Leisure Centre Clapton development helping support overall growth in the sector.

Outcomes for health construction were mixed, with the vertical rising 3% against the preceding three months to stand 24% lower than the previous year. Education also experienced an inconsistent period, declining 9% against the preceding three months to stand 27% up against the previous year. Glenigan says that both are subjects of ongoing government upgrade programmes, which will potentially see activity upticks over the coming months as more assets are brought within its sphere of operations.

Retail starts were equally mixed, increasing 13% against the preceding three months to stand 15% down against the previous year.

It was less positive for community & Amenity project starts, which declined by 31% against the preceding three months to stand 21% up against the previous year, with the £91million Newcastle Government Hub development, a standout project.

Following a relative period of growth, Industrial performance was especially poor, declining by 17% against the preceding three months to stand 10% below the previous year.

Civils work was equally unimpressive, with on-site declines down by 9% against the preceding three months and standing 20% down against the previous year. Drilling down into the vertical, infrastructure work starting on-site plummeted 40% against the preceding three months and declined by 38% on the previous year. However, an uptick in Utilities avoided an overall vertical crash, having increased 33% against the preceding three months and by 11% against the previous year.

Looking at regional performance across the UK, London experienced a strong performance, rising by 29% against the preceding three months to stand 30% up against the previous year. Standout projects included the £92million Kidbrooke Village apartment development near Greenwich. Northern Ireland performed well too, rising 43% against the preceding three months to finish 22% up against the previous year.

Elsewhere, the results were disappointing. The South West experienced a poor performance, declining 17% against the preceding three months to stand 35% down against the previous year. The West Midlands fared no better, dropping by 22% against the preceding three months and falling by 25% against the previous year.

The South East also performed poorly, declining 23% against the preceding three months to stand 19% down against the previous year.

Source: Showhouse