IN Brief:
- UK construction output is forecast to grow 3.5%–4.5% in 2026.
- Infrastructure, defence, transport, energy, and data centres are highlighted as drivers.
- Tender price inflation is projected to reach 4% by 2029.
A new McBains market outlook projects UK construction growth of between 3.5% and 4.5% in 2026, with infrastructure work carrying the aggregate figures while private-sector development remains constrained by financing costs, planning delay, labour availability, and persistent cost pressure.
The report frames the current cycle as a recovery phase that is progressing at different speeds by sector. Infrastructure is identified as the lead contributor, with defence, energy, and transport programmes expected to provide a steadier pipeline than housebuilding and commercial development. Data centres are also flagged as a sub-sector to watch, reflecting the continued build-out of high-load digital infrastructure and its knock-on demands across civil, structural, and power delivery scopes.
On pricing, McBains forecasts tender price inflation of 2.75% in 2026, rising to 4% by 2029. Beyond tenders, the report expects the Building Cost Index to climb by approximately 18% by 2031, driven by labour and materials inputs, rather than a single dominant commodity shock. The outlook notes that volatility risk has not fully cleared, and that cost management remains a defining constraint even where workload is growing.
Procurement practice is treated as a live pressure point rather than an administrative footnote. The report identifies a shift towards two-stage hybrid procurement, linked to the practical difficulty of accommodating Building Safety Act gateway requirements through traditional single-stage tendering on more complex projects. It also points to contractors becoming more selective in bid decisions, with client reputation, project complexity, and programme risk shaping tender appetite.
Workforce capacity remains central to the forecast. The report points to persistent shortages and suggests that hundreds of thousands of additional workers will be required over the next decade to meet projected workloads. It also argues that the growing adoption of AI will not, on its own, ease shortages in core site-based and skilled trade roles, even if it changes staffing needs in administrative and professional functions.
Regulatory scope creep is identified as another potential friction point. The report highlights industry concern over the prospect of the high-risk building height threshold being lowered to 11 metres, expanding the population of buildings subject to the tighter gateway regime. Colin McCaffrey, director at McBains, said: “The potential lowering of the high risk building height threshold will mean pulling another 30,000+ buildings into the HRB-category in England, of which over 60% would be in London. There are obviously serious questions over whether the industry would be ready for such a change and it would mean thousands of projects, such as much needed new housing, at risk of stalling.”
The outlook also flags the potential for a legislative ban on retention clauses to drive wider changes in client surety arrangements, adding another moving part to contract strategy and project risk allocation as the market moves through 2026 and beyond.
