Construction Output 2025 year to date
From our September finding the latest ONS data on construction output paints a mixed picture across the different segments of the industry, resilience in some areas but continued challenges in others.
Housing
The data highlights a divergence between public and private housing projects. Public new housing has slipped 7.3% from January to June. This is possibly due to budget constraints, planning bottlenecks or prioritisation of other infrastructure spending.
By contrast, private new housing shows a modest improvement, up 1.7%. The upward movement indicates that developers are beginning to recover, albeit cautiously, from the recent slowdown.
Infrastructure and Public Sector Work
One of the strongest areas of performance lies in infrastructure new work, which rose 4.4% from January to June. This trajectory suggests momentum in projects such as transport, energy and utilities which is no surprise with the Governments ambitious 10 year infrastructure strategy.
Public other new work, has risen 2.1% and is overall 35% higher than in 2022, underlining the scale of public investment outside of housing. Schools, hospitals and civic buildings are key drivers, supported by government pledges to improve national infrastructure and public services.
Private Sector Construction
Performance in private sector categories is uneven. Private industrial new work has strengthened, rising 2.6%. This growth is likely tied to demand for logistics hubs, manufacturing facilities and renewable energy projects.
In contrast, private commercial new work has slipped by 2.3% since the start of the year. This reflects ongoing weakness in retail and office development, sectors which continue to adjust to hybrid working patterns, subdued consumer spending, and structural changes in high streets.
In contrast to this data, the G&T TPI Survey Feedback suggests that activy in the commercial space is a lot more stable with,
“Several clients using the quieter period to reposition assets, especially legacy offices, through refurbishment and fit-out projects aimed at meeting evolving ESG standards and anticipating a future uplift in demand around 2027–28.”
What This Means for Businesses
Our analysis shows a two-tier UK construction market in 2025, public sector investment, infrastructure, and repair & maintenance are driving growth, while housing and commercial development remain slightly subdued.
That being said, the government’s recent announcement of the National Housing Bank, expected to unlock £53 billion in finance and support the delivery of over 500,000 new homes, points to a more positive medium- to long-term trajectory. While the near-term environment remains restrained, this initiative will provide a significant boost to housing output in the years ahead.
UK Construction PMI
Although Q2’s construction output growth provided some welcome relief, underlying market conditions remain difficult. Total new orders declined by 8.3% to £10.8 billion. This highlights a growing imbalance in the sector, activity this quarter has been underpinned by existing contracts, but the forward pipeline is showing clear signs of weakness. With the autumn approaching, the upcoming Budget will be critical in determining whether demand can be stabilised or if the slowdown will intensify.
The PMI dropped to 44.3, down from 48.8 in June, marking the steepest monthly decline since May 2020 and reinforcing our sector’s struggle to regain consistent momentum.
All three key sub-sectors—housing, commercial, and civil engineering—recorded falling activity, with civil engineering suffering the sharpest drop. Residential building, which had shown signs of stabilising, also saw a renewed and worrying decline.
So, what are the reasons for the downturn? The downturn was driven by a lack of new projects, subdued demand and a decline in new orders for the seventh consecutive month. Companies have cited a lack of tender opportunities and hesitancy from customers to commit to projects.
As for the lay offs and recruitment freezes, we can see that from the construction job vacancies data that the reduction in open positions reflects this sentiment that contractors and firms are hesitant to expand at this moment in time.
Tender Price Index – Mid‑2025 Snapshot
In Q2 2025, BCIS data shows tender prices rose by 0.5% from Q1, marking 2.3% annual growth—a steady pace maintained from the previous quarter. This uptick is well below the 10.3% peak in Q2 2022, signalling a cooling in cost pressures.
To measure appetite to tender 64% of BCIS TPI panel members reported eager contractor willingness to tender. 23% reported that project pipelines had reduced slightly. As public-sector clarity lags, contractors remain cautious. Overall, tender price inflation is modest but sustained at this midpoint in 2025.
Q3 Mild Uplift with Regional Nuance
According to Knight Frank’s latest data, tender price inflation remains moderate—comfortably below the peaks we saw in 2022. Reflecting broader market trends, this restrained pace of increases is easing cost pressures for developers and buyers.
Data from Gardiner & Theobald MarketIntel offers more in depth regional detail in its Q3 forecasts. Across the UK, regions are expected to see annual tender price inflation of 2.25% in 2025, with a gradual rise to 2.50% in 2026.
- Greater London holds steady at 2.50% annually, signalling price stability amid urban demand.
- The East of England stands out, with slightly higher inflation at 3.00% in 2025, likely driven by local construction activity.
- Yorkshire & Humber starts lower at 1.75% but is projected to climb to 2.25% by 2026.
- Other regions—Midlands, South West, Wales, Scotland, etc.—all cluster around 2.25–2.50%, indicating broadly consistent inflationary expectations.
What this means
Tender prices for construction remain elevated but controlled. Across most areas, buyers and contractors are seeing gentle, predictable cost increases—not abrupt spikes. Higher inflation is expected in some regions (notably East Anglia), but overall, the outlook is encouragingly steady.
As project pipelines build, especially amid planned infrastructure and housing investment, this gradual pricing trend supports clearer budgeting and more confident tendering.
Construction Vacancies in 2025
After a sharp dip earlier in the year, construction vacancies appear to have found some stability. Vacancies fell from 43,000 in January and February to 33,000 in March and April, before levelling off at 30,000 in April to July.
That’s still a notable drop — down 30% from Q1 to Q2 — but the data now points to a pause rather than a freefall. This slowdown in hiring reflects the cautious mood across the sector, influenced by reduced tender activity and a dip in new orders. However, the fact that numbers have held steady since May suggests some underlying resilience.
Housebuilding continues to provide a steadier base, and as future projects move from planning to delivery — particularly those linked to public investment — hiring may gradually pick up again. While the industry is clearly being careful, it’s also watching for the right moment to bounce back.
Construction average weekly earnings
Average weekly earnings in the construction sector rose to £812 in June 2025, up from £802 in May. That’s a 1.5% month-on-month increase, showing a modest but meaningful uptick after several months of cooling wage growth.
While this still reflects a slower pace compared to 2024’s highs, it suggests the market may be adjusting rather than sliding. Wage growth had slipped earlier this year as new orders fell and confidence dipped—but June’s improvement hints that pay could begin trending upward again.
Backing this optimism is the UK Government’s 2025 Spending Review, which commits £39 billion for new social and affordable housing and £725 billion in infrastructure investment over the next decade. Interim allocations, like £4.8 billion for National Highways and £2.5 billion for East West Rail in 2025/26, are already driving tenders and early-stage demand.
As projects move from planning into delivery, labour requirements will rise. With construction vacancies already tight, this could put upward pressure on wages in the months ahead—especially for skilled roles in transport, utilities, and public works.
A Strategic Take
“When we look at the latest figures, new orders are falling, vacancies are down by nearly a third, and the PMI is pointing to contraction. That tells us confidence in the market is shaky, businesses are pausing before committing to new projects. Unfortunately, the short term will feel tougher than many hoped — but it’s not all negative. The National Housing Bank and long-term government infrastructure plans are designed to unlock future opportunity. The challenge for businesses is bridging the gap between today’s caution and tomorrow’s growth.
My advice is this – don’t wait until the market bounces back to think about your workforce. Use this quieter period, as mentioned in the G&T survey, to plan ahead. Now’s the time secure the people and skills that will be in highest demand when projects pick up. Our software’s purpose is to make sure you have the right team in place and to be ready for the opportunities that are already on the horizon.”
