THE PROPERTY FILTER TAKE
UK construction starts fell 15% in Q2 2026, leaving the sector 38% below 2025 levels, with residential starts down 31% quarter-on-quarter and private housing down 63% year-on-year.
The build cost implication is significant: rising labour and material costs are compounding a shrinking pipeline, meaning developers already hesitant to commit are facing both demand-side weakness and cost-side pressure simultaneously - squeezing viability margins before the expected recovery arrives.
You may wish to consider land acquisition timing carefully: Glenigan forecasts a bottoming out in Q4 2026 and a meaningful uptick in 2027 - sites secured before that upswing could offer better entry conditions for development-ready schemes.
UK construction starts fell sharply through Q2 2026, with the sector now 38% below 2025 levels, according to Glenigan's July Construction Index (published 7 July 2026). The value of starts on site dropped 15% during the quarter, as geopolitical uncertainty and rising costs continued to suppress developer confidence. Glenigan has revised its recovery forecast back from H2 2026 to 2027.
What does the Glenigan data show?
The Glenigan Index tracks construction starts on projects under £100m in value, covering the vast majority of UK development activity. The July 2026 edition presents a sector that remains, in the words of Glenigan's economic director Allan Wilen, "stuck amid weak economic growth and geopolitical uncertainty."
Each quarter of 2026 has delivered weaker results than the last. One source of instability has replaced another before the sector can find its footing. That pattern is now reflected in Glenigan's revised Summer Forecast. The forecast has pushed the expected recovery date from H2 2026 back to 2027, with 2026 now expected to finish in negative territory.
Bright spots were few. Office construction continued to buck the overall trend, and education and health posted modest gains. These were not enough to offset the weight of residential and civil engineering weakness.
Residential: the sharpest decline
Residential starts were the most significant drag on Q2 performance. Starts fell by almost a third (-31% quarter-on-quarter), with project values down roughly half (-50%) compared to 2025 levels (Glenigan, July 2026).
Private housing suffered the steepest fall. Starts dropped 40% against the preceding three months, finishing 63% below the same period last year. The drivers are familiar: interest rates held at elevated levels have dampened buyer demand, while rising labour and material costs have made developers reluctant to commit before the sales market stabilises.
Social housing also contracted, though less severely. Rising materials costs and a backlog of delayed projects pushed social housing starts down 11% quarter-on-quarter and 18% year-on-year (Glenigan, July 2026).
For developers tracking supply pipeline constraints, this matters directly. Fewer starts today means fewer completions in 12 to 18 months. Those reviewing property investment strategies for 2027 and beyond should note that the new-build pipeline is thinning at exactly the moment demand is expected to return.
Non-residential and civil engineering: a mixed picture
Not all sectors moved in the same direction.
Office construction delivered the strongest non-residential result, rising 51% against the preceding three months and standing 8% above last year's level. The £99 million West One development in London contributed significantly to this figure (Glenigan, July 2026).
Education held up relatively well, rising 17% during the quarter and 7% year-on-year, supported by the £49.7 million Mercia and Newhall Schools development in Derbyshire and the ongoing Schools Rebuilding Programme.
Health activity rose a modest 2% quarter-on-quarter, driven partly by the New Hospitals Programme, but project starts remained 28% lower than a year ago.
Industrial, hotel and leisure, and retail all continued to decline. Industrial fell 15% during Q2 to stand 29% under 2025 figures. Hotel and leisure dropped 14% quarter-on-quarter and 42% year-on-year. Retail weakened 27% against the preceding three months and stood 9% below the previous year (all figures Glenigan, July 2026).
Civil engineering was particularly hard hit. Work starting on-site declined 19% against the preceding three months and fell 45% year-on-year. Infrastructure was the main culprit, falling 28% quarter-on-quarter to finish 51% lower than in 2025. Utilities declined 7% quarter-on-quarter and were 36% below last year's level.
The build cost and planning risk implications
The build cost implication of this data is significant for any developer assessing viability right now.
Labour and material costs remain elevated. Wilen notes that developers are "adjusting their development programmes in response to a slowing housing market" - a clear sign that cost-side pressure is driving decisions as much as planning risk. Where a scheme was marginal twelve months ago, it may be unviable today without a reworked cost plan.
The timeline for many stalled residential schemes is also extending. With social housing contractors facing materials cost pressures and a backlog of delayed projects, subcontractor availability for private development is further squeezed. Schemes relying on PDR (Permitted Development Rights) - which removes the planning risk element - may offer a more predictable cost model in the current environment, since the planning timeline is fixed.
Political uncertainty adds a further layer of complexity. Wilen noted that "the impending change of Prime Minister will add to uncertainty near term and could disrupt the roll-out of departmental investment programmes." For developers with grant-funded affordable housing components, this is a live planning risk in 2026.
Those working through deal feasibility may find the stress-test calculator at Property Filter useful for modelling multiple cost scenarios before committing. Those looking for sites where viability holds up in the current market may wish to explore Property Filter's sourcing software, which allows screening by planning status, type, and location.
2027 recovery: what to watch
Despite the difficult current picture, Glenigan's revised forecast does not signal a prolonged contraction. The sector is expected to bottom out in Q4 2026, with a more meaningful recovery beginning in 2027.
Wilen strikes a cautiously positive note: "Whilst this year will end in negative numbers, our forecasting predicts that we will see a return to growth next year as economic conditions improve, alongside an easing in inflationary pressures and interest rates, and as funding from the Spending Review grows. So, whilst the current picture is unclear, we should expect to see, at least, some bottoming out and revival in Q4, heralding a larger uptick in 2027."
The triggers for recovery are specific: improved economic conditions, lower interest rates, easing inflationary pressure, and Spending Review funding flowing into the supply chain. None of those have a fixed timetable, but Q4 2026 is Glenigan's expected floor.
Regionally, the West Midlands posted the strongest Q2 performance, rising 59% against the preceding three months, though still 14% below the previous year. London weakened, falling 15% quarter-on-quarter and 22% year-on-year. Scotland saw one of the steepest falls at 28% for the quarter and 49% year-on-year (Glenigan, July 2026).
For developers considering timing on land positions or scheme starts, a deal analysis framework that factors in market timing, planning risk, and build cost may be worth revisiting ahead of the Q4 inflection point. Free property investment resources covering site appraisal and development feasibility are also available.
Key takeaways
• UK construction starts fell 15% in Q2 2026, leaving the sector 38% below 2025 levels (Glenigan, July 2026)
• Residential starts fell 31% quarter-on-quarter and private housing is down 63% year-on-year - the worst performing segment
• Civil engineering starts fell 45% year-on-year, with infrastructure down 51% against 2025 levels
• Glenigan has pushed its recovery forecast back to 2027, with Q4 2026 expected to mark the trough
UK construction starts fell sharply through Q2 2026, with the sector now 38% below 2025 levels, according to Glenigan's July Construction Index (published 7 July 2026). The value of starts on site dropped 15% during the quarter, as geopolitical uncertainty and rising costs continued to suppress developer confidence. Glenigan has revised its recovery forecast back from H2 2026 to 2027.
What does the Glenigan data show?
The Glenigan Index tracks construction starts on projects under £100m in value, covering the vast majority of UK development activity. The July 2026 edition presents a sector that remains, in the words of Glenigan's economic director Allan Wilen, "stuck amid weak economic growth and geopolitical uncertainty."
Each quarter of 2026 has delivered weaker results than the last. One source of instability has replaced another before the sector can find its footing. That pattern is now reflected in Glenigan's revised Summer Forecast. The forecast has pushed the expected recovery date from H2 2026 back to 2027, with 2026 now expected to finish in negative territory.
Bright spots were few. Office construction continued to buck the overall trend, and education and health posted modest gains. These were not enough to offset the weight of residential and civil engineering weakness.
Residential: the sharpest decline
Residential starts were the most significant drag on Q2 performance. Starts fell by almost a third (-31% quarter-on-quarter), with project values down roughly half (-50%) compared to 2025 levels (Glenigan, July 2026).
Private housing suffered the steepest fall. Starts dropped 40% against the preceding three months, finishing 63% below the same period last year. The drivers are familiar: interest rates held at elevated levels have dampened buyer demand, while rising labour and material costs have made developers reluctant to commit before the sales market stabilises.
Social housing also contracted, though less severely. Rising materials costs and a backlog of delayed projects pushed social housing starts down 11% quarter-on-quarter and 18% year-on-year (Glenigan, July 2026).
For developers tracking supply pipeline constraints, this matters directly. Fewer starts today means fewer completions in 12 to 18 months. Those reviewing property investment strategies for 2027 and beyond should note that the new-build pipeline is thinning at exactly the moment demand is expected to return.
Non-residential and civil engineering: a mixed picture
Not all sectors moved in the same direction.
Office construction delivered the strongest non-residential result, rising 51% against the preceding three months and standing 8% above last year's level. The £99 million West One development in London contributed significantly to this figure (Glenigan, July 2026).
Education held up relatively well, rising 17% during the quarter and 7% year-on-year, supported by the £49.7 million Mercia and Newhall Schools development in Derbyshire and the ongoing Schools Rebuilding Programme.
Health activity rose a modest 2% quarter-on-quarter, driven partly by the New Hospitals Programme, but project starts remained 28% lower than a year ago.
Industrial, hotel and leisure, and retail all continued to decline. Industrial fell 15% during Q2 to stand 29% under 2025 figures. Hotel and leisure dropped 14% quarter-on-quarter and 42% year-on-year. Retail weakened 27% against the preceding three months and stood 9% below the previous year (all figures Glenigan, July 2026).
Civil engineering was particularly hard hit. Work starting on-site declined 19% against the preceding three months and fell 45% year-on-year. Infrastructure was the main culprit, falling 28% quarter-on-quarter to finish 51% lower than in 2025. Utilities declined 7% quarter-on-quarter and were 36% below last year's level.
The build cost and planning risk implications
The build cost implication of this data is significant for any developer assessing viability right now.
Labour and material costs remain elevated. Wilen notes that developers are "adjusting their development programmes in response to a slowing housing market" - a clear sign that cost-side pressure is driving decisions as much as planning risk. Where a scheme was marginal twelve months ago, it may be unviable today without a reworked cost plan.
The timeline for many stalled residential schemes is also extending. With social housing contractors facing materials cost pressures and a backlog of delayed projects, subcontractor availability for private development is further squeezed. Schemes relying on PDR (Permitted Development Rights) - which removes the planning risk element - may offer a more predictable cost model in the current environment, since the planning timeline is fixed.
Political uncertainty adds a further layer of complexity. Wilen noted that "the impending change of Prime Minister will add to uncertainty near term and could disrupt the roll-out of departmental investment programmes." For developers with grant-funded affordable housing components, this is a live planning risk in 2026.
Those working through deal feasibility may find the stress-test calculator at Property Filter useful for modelling multiple cost scenarios before committing. Those looking for sites where viability holds up in the current market may wish to explore Property Filter's sourcing software, which allows screening by planning status, type, and location.
2027 recovery: what to watch
Despite the difficult current picture, Glenigan's revised forecast does not signal a prolonged contraction. The sector is expected to bottom out in Q4 2026, with a more meaningful recovery beginning in 2027.
Wilen strikes a cautiously positive note: "Whilst this year will end in negative numbers, our forecasting predicts that we will see a return to growth next year as economic conditions improve, alongside an easing in inflationary pressures and interest rates, and as funding from the Spending Review grows. So, whilst the current picture is unclear, we should expect to see, at least, some bottoming out and revival in Q4, heralding a larger uptick in 2027."
The triggers for recovery are specific: improved economic conditions, lower interest rates, easing inflationary pressure, and Spending Review funding flowing into the supply chain. None of those have a fixed timetable, but Q4 2026 is Glenigan's expected floor.
Regionally, the West Midlands posted the strongest Q2 performance, rising 59% against the preceding three months, though still 14% below the previous year. London weakened, falling 15% quarter-on-quarter and 22% year-on-year. Scotland saw one of the steepest falls at 28% for the quarter and 49% year-on-year (Glenigan, July 2026).
For developers considering timing on land positions or scheme starts, a deal analysis framework that factors in market timing, planning risk, and build cost may be worth revisiting ahead of the Q4 inflection point. Free property investment resources covering site appraisal and development feasibility are also available.
Key takeaways
• UK construction starts fell 15% in Q2 2026, leaving the sector 38% below 2025 levels (Glenigan, July 2026)
• Residential starts fell 31% quarter-on-quarter and private housing is down 63% year-on-year - the worst performing segment
• Civil engineering starts fell 45% year-on-year, with infrastructure down 51% against 2025 levels
• Glenigan has pushed its recovery forecast back to 2027, with Q4 2026 expected to mark the trough
Frequently asked questions
Frequently asked questions
Why have UK construction starts fallen so sharply in 2026?
Which sector has been hardest hit?
When is UK construction expected to recover?
What does this mean for housing supply?
