UK construction output falls, costs rise

Britain’s construction slowdown is no longer just a housing story. It’s turning into a broader financing-and-cost story — the kind that starts with fewer site starts and ends with thinner pipelines for everyone from groundworkers to electricians. The latest official output data already showed the sector shrinking through February 2026. Then this week’s RICS survey added the mood on the ground — softer workloads, worse credit, and rising cost expectations. ### What actually fell? The hard data first. UK construction output fell 2.0% in the three months to February 2026, which made it five consecutive falls in the rolling three-month series. New work was the main drag, down 3.4%, while repair and maintenance was flat. Private new housing was the biggest negative contributor, down 6.5%. That matters because housing usually pulls a long tail of subcontracted work behind it. (ons.gov.uk) ### Why does private housing matter so much? Because when private housing weakens, the damage spreads fast. Housebuilders delay land buying, phase projects more cautiously, and push harder on procurement. That means fewer clean starts for trades and less certainty for suppliers. If private new housing is the biggest drag in the official data, it usually tells you the sector is struggling with affordability and confidence, not just weather or one-off disruption. (ons.gov.uk) ### So what changed this week? The new RICS UK Construction Monitor for Q1 2026 showed the slowdown broadening. The headline workloads indicator fell to -12% from -6% in the previous quarter. Private housing dropped to -19%, and private commercial and private industrial both slid to -15%. Infrastructure was still positive, but only barely compared with late 2025. In other words — the one part of the market still growing is losing momentum too. (ons.gov.uk) ### Is this mostly a cost problem? Partly, but not only. Firms in the RICS survey now expect construction costs to rise 6.6% over the next 12 months, with materials costs seen up 7.5% and tender prices up 5.6%. That is awkward math. If your input costs are rising faster than clients can absorb, margins get squeezed and bids get harder to win. Developers do not need a full-blown crisis to pause projects — they just need the numbers to stop working. (rics.org) ### Where does the “44%” number fit? That figure comes from a broader ONS business survey, not a construction-only poll. But it still helps explain the pressure. More than two in five importers — 44% of trading businesses that imported — said their importing costs were higher in March 2026 than a year earlier. That was up 14 percentage points since December 2025 and the highest share since June 2023. For a construction sector that depends on imported products and components across finishes, MEP kit, and specialist materials, that feeds straight into estimating and procurement. (rics.org) ### Why are borrowing costs such a big deal? Because credit is now the choke point. RICS said credit conditions over the past three months came in at -29%, and expectations for the next three months fell to -51%. Financial constraints were the most-cited limit on activity, named by 66% of respondents. That tells you this is not just “materials got pricier.” It is also that money is harder to get, harder to justify, or both. (ons.gov.uk) ### What gets hit first? Usually the more discretionary work. Private housing starts slow. Commercial schemes get rephased. Retrofit and repair jobs can hold up better for a while, but even there the official data showed no growth over the three months to February. If clients are nervous and financing is tight, non-urgent upgrades are easy to postpone. That is bad news for smaller regional contractors that rely on steady mid-sized jobs rather than giant infrastructure packages. (rics.org) ### Is there any part still holding up? Yes — infrastructure, especially energy and water-related work. RICS still showed energy at +24% and water and sewage at +20%. But the catch is that infrastructure alone cannot fully offset weakness across private housing, commercial, and industrial activity. It can keep parts of the market alive. It cannot, by itself, create a broad recovery. (ons.gov.uk) ### Bottom line? The UK construction story right now is simple, even if the mechanics are messy. Output is already falling, private housing is leading the slide, imported inputs are getting costlier, and credit has tightened into a real constraint. That combination does not just hurt current margins — it threatens the next round of projects too. (ons.gov.uk) (rics.org)