Merchant Exchange
The Construction Products Association has downgraded its output forecasts for 2026 and 2027, warning that higher oil and energy prices will keep inflation and borrowing costs elevated for longer.
The Construction Products Association (CPA) now expects total construction output to fall by 4.0% in 2026 and grow by just 0.4% in 2027. Its summer forecast predicted a 3.3% fall this year and 1.2% growth next year.
The CPA said higher oil and energy prices since September are likely to keep inflation and lending rates higher than previously expected, with the biggest impact on the two largest sectors, private housing and repair, maintenance and improvement (RM&I).
House builders have reported weaker demand and activity since spring, in line with higher mortgage rates since the Middle East conflict. The CPA said further rate rises, combined with higher energy costs, are likely to hit affordability and site viability over the next six to nine months. Private housing output, estimated to have fallen 10.0% this year, is forecast to fall a further 3.0% in 2027. The government’s Your First Home equity loan scheme may help with deposits, but the CPA said longer-term mortgage affordability remains a significant downside risk.
RM&I output is forecast to fall by 8.0% in 2026 and 2.0% in 2027, as homeowners prioritise saving or day-to-day spending over major improvements. Basic repairs and maintenance have held steady, while solar PV, heat pumps and fire safety remediation continue to grow.
Infrastructure is still expected to grow, by 2.5% in 2026 and 2.9% in 2027, down from 3.2% in both years in the summer forecast. Energy, National Grid and water investment are offsetting declines in road and rail, though the CPA flagged concerns about delays to road projects and a slower “HS2 reset”.
CPA Head of Construction Research Rebecca Larkin said the recovery expected in the second half of next year has been pushed back, particularly in privately financed sectors.
“Viability has risen up the risk list across construction, particularly in house building, highlighting that supply-side constraints are as big an issue as weak demand,” she said.
She added that, with the Autumn Budget on 28 October, the government must also address rising cost burdens on house building and construction supply chains.
