Statement from John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Material Supply Chain Group.
The first report of the year from the CLC’s Material Supply Chain Group is notable for its bleak assessment of market prospects without urgent action to stimulate demand.
The UK construction industry continues to face significant challenges, as evidenced by a sharp decline in output in the final quarter of 2025. While the UK economy grew by 0.3% in November, construction output fell by 1.3%.
Concrete orders serve as a good indicator of construction activity. Volumes nationally have decreased by around 28% over the past four years. London, usually the busiest market, has experienced a 39% decline in the last two years.
There are no notable product availability issues, and, unsurprisingly, in the current market, supply often exceeds demand. For example, brick manufacturers who invested in capacity when the government announced its housing ambition now hold large stock levels. While they are well-placed for an eventual recovery, given the subdued demand, they are reassessing how much production to maintain.
Elsewhere, major manufacturers are making decisions based on current volumes. As a result, for those starting from a low base, it will take up to six months for production capacity to adjust if demand significantly improves. Where the prolonged weakness in demand has forced producers to reshape their business by mothballing sites, delaying investment, or making redundancies, restarting capacity is neither quick nor straightforward. The longer the market remains stagnant, the concern shifts from near-term impacts to longer-term consequences and risks.
The ongoing weakness in demand, rising costs, and cash flow pressures have taken their toll on the supply chain, resulting in a steady stream of administrations in recent months. Increasingly, the supply side focuses on protecting margins and controlling costs.
The main issues behind construction’s poor performance are structural. Delayed investment decisions, increased client caution, ongoing economic volatility, and a lack of consumer confidence have all contributed to a notable drop in new orders.
Timing presents another challenge. Although some major projects have technically commenced, the physical build phase lags behind the planning and agreement stages. The significant extension of PCSA periods across many schemes is especially worrying for major contractors, where longer timelines mean projects take more time to complete, delaying revenues.
While large infrastructure schemes, including the prison programme, are progressing, this alone cannot offset the weakness in housing, where the government’s flagship commitment to deliver 1.5 million new homes remains far off track, hindered by planning capacity issues, regulatory delays, and weak investor confidence. Overall, there is no meaningful recovery across the major sectors.
Many in the industry had hoped that, after three difficult years, the sector would finally move into recovery in 2026. Potential catalysts include increased investment from the water sector, rising government infrastructure spending, and the Planning and Infrastructure Act, which could help unlock stalled projects in the medium term.
However, sustained recovery will depend heavily on renewed investment in new homes and residential RMI. Given the persistent difficulties and the sector’s importance to the wider economy, and with consumer confidence remaining stubbornly low, this group believes that targeted stimulus measures are now essential to restore momentum, support job creation, and unlock latent demand for materials and labour.
