The Chancellor set out the latest budget last month with a familiar message for the UK construction industry: a promise of stability and long-term ambition over short-term relief. Commitments to infrastructure, planning reform, skills and net-zero investment are significant and should not be overlooked as key policies that will frame the industry moving forward. However, in practice, the industry response has been more cautious than celebratory.
From our position at CHP, working between developers, funders and project delivery, the overriding consensus we see is one of measured restraint rather than renewed confidence.
The Government’s protection of long-term capital investment, particularly in infrastructure, energy, transport and public-sector works, is undoubtedly positive. The renewed focus on planning reform, including additional resourcing for local authorities is also welcome, feeding into the Government’s commitment to deliver new homes and spaces. Delays in planning have become one of the greatest drags on project viability and capital deployment, particularly across housing and mixed-use schemes.
Equally the support for apprenticeships and training reflects an acknowledgement of long-standing skills shortages across the sector where we have seen this impact the supply chain. These changes over the medium term should strengthen delivery capacity.
However, the budget does not provide an immediate solution to demand, in particular for private housing and speculative development. Developers are already dealing with higher financing costs, constraints with consumer demand and uncertainty with exit values, which is a result of the absence of direct market stimulation, in turn damping short-term confidence.
The message from Government is clear: the recovery is expected to be investment-led and infrastructure-driven, not fuelled by consumer-led housing growth.
Rising costs remain a dominant concern in the industry
A continuous issue which has been echoed across industry commentary since the Budget is cost pressure. The rising wage bills, driven by minimum wage increases and employment costs continue to narrow already tight project margins, particularly for SMEs and labour-intensive trades.
While the decision to abandon proposed landfill tax reforms was a relief for many contractors and developers, it does little to offset the broader cost environment. Materials, preliminaries, compliance and finance costs continue to challenge project viability, which we have seen over the last few years.
From a cost-management perspective, we are seeing increasing emphasis on:
- Early contractor engagement to de-risk pricing
- More forensic value engineering at the feasibility stage
- Greater scrutiny from funders on contingency strategy and risk allowances
- Tighter control of change and employer risk transfer
In short, the industry is not pricing for optimism, it is pricing for resilience.
A two-speed industry: Advancing Infrastructure and Housing Retreats
The divergence between public/infrastructure-led construction and private housing has never been clearer.
Recent data shows private housing starts remain significantly depressed, while sectors such as offices, industrial, energy and social housing have shown selective signs of recovery. This aligns with the intent of the Budget: long-term public investment is effectively acting as the industry’s stabilising anchor.
For developers, this has sharpened strategic choices:
- Those with exposure to infrastructure, social housing, retrofit, building safety and net-zero projects are seeing more consistent opportunities.
- Those focused on private residential and mixed-use developments remain highly sensitive to funding terms, market confidence and planning risk.
For funders, risk allocation has shifted decisively toward deliverability and cost certainty rather than speculative upside.
One of the most concerning post-Budget signals is the growing vulnerability of SMEs across the supply chain. With limited ability to absorb rising employment costs and thinner balance sheets, many smaller contractors face a difficult 12–24 months.
This raises two important implications:
- Heightened delivery risk for developers and funders as subcontractor insolvency and capacity issues remain live threats.
- A likely period of industry consolidation with stronger firms absorbing struggling businesses.
From a funder’s viewpoint, counterparty strength and procurement strategy have never mattered more. From a developer’s viewpoint, programme certainty now depends as much on supply-chain resilience as on planning approvals.
What does this mean for developers and funders right now?
The latest Budget reinforces a market that is:
- Selective rather than expansive
- Infrastructure-led rather than housing-led
- Cost-driven rather than margin-driven
Where the growth is happening: signs from Glenigan
- According to Glenigan’s latest construction-starts Index (projects under £100m), overall starts rose by 3% in the three months to November 2025, even though the industry remains ~4% below 2024 levels.¹
- A strong driver of that modest rebound has been non-residential starts, up 14% in the period and 15% year-on-year.²
- Within non-residential, three verticals stand out: offices, industrial and social housing. These have been singled out by Glenigan as the “standout verticals” pushing the index upward.³
- On housing: while private residential remains weak, social housing starts have made a noticeable uptick, helping cushion the overall residential decline.⁴
The latest Government Budget offers long-term stability for UK construction through infrastructure and public-sector investment, but it has not restored short-term confidence, particularly in private housing. Rising costs, weak demand and SME vulnerability continue to dominate sentiment. While Glenigan data shows growth in offices, industrial and social housing, the wider market remains selective, cost-driven and highly risk-sensitive. For developers and funders alike, viability, certainty and resilience now matter more than speed or speculative upside.
