The construction sector is set for a rebound between 2026 and 2028 as market conditions ease, according to the latest Construction Forecast from insight and research company Glenigan.

Glenigan forecast that 2026 will end in negative construction growth of -1%, but activity will increase by 11% in 2027 and 4% in 2028, representing a 13% rebound by number of project starts valued under £100m across the forecast period of 2026-2028.

The improved forecast follows Glenigan’s report in April that UK construction starts had fallen 20% in the year to the end of March as a result of the conflict in Iran.

According to the latest forecast, private housing is expected to rebound 13% in 2027, and then by 5% the following year. Social housing construction is expect to rise by 8% next year, and by another 4% in 2028.

Glenigan said these increases would be driven by new government funding such as the £39bn Social and Affordable Housing Fund, changes to the social housing rent cap and an acceleration in approvals by the Building Safety Regulator.

Meanwhile, office construction is forecast to rise 21% by the end of 2026, before slowing in 2027 to 11%, then 4% in 2028.

Retail is forecast to nudge 1% higher by the end of 2026, with subdued growth until 2027, when a 10% increase is expected, before giving way to a 4% decline in 2028.

The forecast is more volatile for hotels and leisure, which is forecast to finish 2026 12% down, only to rise 11% in 2027 before dipping 1% in 2028.

For industrial construction, Glenigan forecasts a 9% downturn this year, a 16% increase next year and a 5% rise in 2028, as a result of changes to national planning policy and the government’s infrastructure strategy.

Allan Wilen, economic director at Glenigan, said: “It’s been a turbulent few months for the UK construction sector, with investors and developers reassessing and rescheduling planned projects.

“However, the economic outlook is expected to improve once the current fog of war dissipates, supporting a strengthening in construction activity from 2027, with an uplift across almost all private and public sector verticals.

“As our forecast shows, there are some particularly exciting growth areas as government funding is released and investor appetite starts to return to the market. Contractors will need to be quick off the mark as more favourable conditions are finally felt.”