Construction in the UK: industry profile

The construction industry is a vital cornerstone of the UK economy, contributing over £141 billion in value added in 2023 (source: ONS). It remains crucial not only for its direct economic output, but for its multiplier effects on related sectors and its role in enabling infrastructure and housing expansion.

ONS data (which cover Great Britain only) show that the industry rebounded strongly after the COVID-19 downturn, surpassing pre-pandemic activity by 2022, and continuing to grow during 2023. In 2023, the sector’s total real-terms output (across both new work and repair and maintenance) climbed to a record £210.7 billion, representing a 2% annual increase. This growth was propelled by surges in infrastructure projects (+4.1% year-on-year) and private commercial building (+6.3%), which offset a 14.3% drop in private housing construction amid a cooling property market.

The industry’s momentum waned somewhat in 2024, however. According to the ONS (GB only), the industry’s total real-terms output grew by only 0.5%, with new work output down by 5.1%. PwC point to high interest rates, investor caution in commercial and industrial settings, and delayed infrastructure projects as having suppressed output in 2024.

Some key statistics for recent years are set out in the table below.

Despite the headwinds faced in 2024 – some of which have continued into 2025 – PwC predict that the industry’s new work output will return to growth between 2025 and 2027, with planning reform and state-led infrastructure spending looking likely to boost the sector’s performance in the coming years. The Construction Industry Training Board (CITB) is also cautiously optimistic in this regard, predicting output growth of 1.6% in 2025, 2.3% in 2026, and 2.4% in 2027.

Some indicators for 2025 appear quite positive, with the ONS estimating total construction output to have grown by 1.2% in the three months to May 2025 (new work up 0.9%; repair and maintenance up 1.5%). However, others point to lingering issues — S&P Global's UK Construction PMI for October 2025, for example, flags steep reductions in housing and civil engineering activity.

Attaining and sustaining robust levels of growth will require industry players to navigate a range of trends and challenges, including skill shortages and evolving policy priorities. Some key issues currently affecting the industry are explored in more detail below.

Broadly, the industry’s output is split between new work (around 55% of total output in 2024, according to ONS data) and repair and maintenance (R&M, approximately 45% of total output in 2024).

Within new construction, residential building (housing) and infrastructure are the two largest segments. Housing (private developers and public housing combined) typically accounts for about one-third to two-fifths of new work output, while infrastructure projects (eg, transport, utilities) have expanded to roughly 25% of new work output in recent years, boosted by mega-projects like HS2. By contrast, commercial construction (offices, retail, leisure, etc.) has shrunk – a trend exacerbated by the rise of remote work and e-commerce reducing demand for new office and retail space. Industrial construction (eg, factories, warehouses) and public institutional building (eg, schools, hospitals) make up the remainder.

Segmentation by firm size is stark. Whilst there are a handful of Tier-1 contractors and developers who lead on major projects, in general the industry is highly fragmented, being characterised by a long tail of micro, small and medium-sized firms and specialists. As noted in a 2023 report published by the Chartered Institute of Building (CIOB), the industry has large numbers of small firms and a high level of self-employment – around 36% of the construction workforce were self-employed as of 2022. In larger-scale projects, major construction firms may manage dozens of subcontractors.

In terms of regional segmentation, London accounts for by far the largest share of construction output in absolute terms (around a quarter of new work during the period January to March 2025, according to ONS data). That said, the relative size of the construction sector is broadly similar across regions, with construction activity generally being distributed broadly in line with population – as noted in a recent House of Commons Library briefing. However, it accounts for a notably larger share of the economies of the East of England (8.8%) and Northern Ireland (8.2%) than the UK overall (6.2%).

Persistent and worsening labour shortages constitute one of the most urgent issues facing the UK construction industry, having the potential to become a binding constraint on growth.

Here, one key issue is that of the industry’s ageing labour pool. The Construction Industry Council (CIC) note that the age profile of the UK-born construction workforce peaks at between 50 and 64 years old, meaning the industry will lose a quarter of its workforce in the next 10 to 15 years.

In addition, the end of free movement with the EU has led to a drop in migrant labour availability. Analysis from the Building the Future Think Tank indicates that the industry has struggled to adapt to the requirements of the post-Brexit points-based immigration system, severely limiting the number of skilled worker visas issued in the sector, relative to other industries.

Meanwhile, industry bodies report difficulties in attracting and retaining the domestic workers necessary to meet projected levels of demand and deliver strong and sustained growth. For example, research from the Home Builders Federation (HBF) shows that apprenticeship completions are falling far short of the required numbers, whilst only 25% of learners on further education (FE) construction courses gain employment in within six months of finishing their course.

Unsurprisingly, unfilled vacancies remain elevated (numbering 140,000+ as of 2024 according to Places for People research), and the rate of wage growth in the industry (7.8% year-on-year in the three months to March 2025, according to Gardiner & Theobald) outpaces that of the UK as a whole (5.5%).

If the industry is to recruit an extra 250,000 workers – the number which the CITB states is required by 2028 – it is likely that a multi-pronged approach will be required. Recently announced government initiatives such as Skills England, the Growth and Skills Levy, and the creation of 32 new Homebuilding Skills Hubs may go some way to addressing the issues in this area.

After a sharp surge in construction input costs during 2021–22, as of mid‑2025 the sector is experiencing some degree of relief in this regard. Following rises in the two preceding quarters, respondents to ICAEW’s Business Confidence Monitor (BCM) for Q2 2025 reported that input price inflation in the sector had slowed, with construction companies expecting it to drop below the historical average in the year ahead. Similarly, Gardiner & Theobald report some reduction in materials costs and signs of stabilising input inflation – though material prices remain elevated relative to pre-pandemic levels.

On the interest rate front, the Bank of England’s base rate has fallen steadily from its peak of 5.25% in mid-2023, reaching 4% by August 2025. Whilst monetary easing is expected to proceed cautiously, further cuts are widely anticipated. The resulting reduction in borrowing costs may help to improve the construction industry’s prospects. In their Construction & Housebuilding Outlook for H1 2025, for example, PwC point to expected interest rate relaxation as a key enabler of growth in the recently beleaguered New Build segment.

Taken together, these developments provide a cautiously optimistic backdrop for the UK construction sector. However, some residual inflation, as well as elevated National Insurance and compliance-related costs (as exemplified by the Building Safety Levy, and other costs arising from the Building Safety Act), look likely to continue to put pressure on margins.

As of mid‑2025, the UK government is bringing forward substantial reforms to the planning system, as well as backing a range of significant infrastructure projects – measures which look set to bring considerable benefits to the construction sector.

Planning constraints have long been cited as a barrier to growth in the industry – construction sector respondents to ICAEW’s Business Confidence Monitor (BCM) for Q2 2025, for example, expressed continued frustration with delays in the planning system.

Recognising such frustrations, the government has committed to transforming the system and accelerating development. Key to this project are the Planning and Infrastructure Bill (introduced in March 2025) and the revised National Planning Policy Framework (published in December 2024). The bill aims to deliver faster consent for Nationally Significant Infrastructure Projects (NSIPs), limit opportunities for judicial review, and embed strategic cross‑boundary spatial planning via Spatial Development Strategies.

Simultaneously, the government has committed to a £725 billion ten‑year infrastructure investment programme, which includes £9 billion per year for repairing hospitals, schools, courts and prisons, as well as £590m to start work on the Lower Thames Crossing project. In addition, it has backed other major projects such as Sizewell C, and the private‑led Heathrow expansion.

As analysts such as Arcadis have noted, these measures have the potential to provide a substantial boost to the construction sector, and increase confidence across the industry. However, Gardiner & Theobald warn that they may contribute to the emergence of a “two-speed picture”, with large, capital-intensive schemes providing plentiful work for top tier firms, whilst lower tier contractors face less positive outlooks.

The UK’s continuing push towards Net Zero presents significant opportunities for the construction industry – though there are obstacles to be navigated.

As Glenigan note, renewable energy and grid enhancement projects represent a key growth area. Proposed large-scale projects such as the Rampion 2 Offshore Wind Farm look set to provide a major boost to the industry, should they go ahead.

Meanwhile, demand for energy‑efficiency retrofits remains strong, bolstered by schemes such as the Energy Company Obligation (ECO). A 2023 report from CIOB predicted that “upgrading the energy efficiency of existing homes through domestic repair, maintenance and improvement […] will support the economy and boost the construction workforce”.

However, these opportunities are counterbalanced by structural obstacles. For one, high initial costs remain a barrier for retrofit initiatives, particularly in older properties. A recent survey of UK homeowners found that, among those interested in energy efficiency improvements, two-thirds were concerned about the cost.

Labour shortages are also an issue here, as elsewhere. Reuters have reported on the sector’s struggle to train the large number of skilled ‘green’ workers needed to deliver Net Zero. There are also warnings of workforce burnout, as existing personnel are stretched to meet rapid Net Zero targets amid limited capacity.

Modern methods of construction (MMC) – defined by Homes England as “a range of building methods that are designed to be more efficient and effective ways of constructing buildings than traditional methods” – have the potential to transform the UK construction sector. When implemented successfully, MMCs such as factory-produced structural systems may offer substantial efficiency and productivity gains, and mitigate the impact of labour shortages.

As NBS have noted, the adoption of MMCs has been increasing: in 2017, only about 9% of new-build projects used some form of MMC; by 2023 this had risen to 16%.

However, challenges remain. For example, respondents to a recent National Housing Federation survey pointed to ‘supplier vulnerability’ as a significant barrier. Several modular manufacturers – such as Lighthouse, which ceased trading in 2024 – have suffered financial trouble or closed in recent years. Meanwhile, other potential obstacles include high upfront capital outlay for factory setup, issues around design standardisation, and perceived risk among financial institutions and insurers.

That said, it seems likely that MMC will be a significant feature of the UK’s construction landscape in the coming years, particularly in publicly funded projects. As of August 2025, the latest version of the government’s Construction Playbook advises its readers to “actively consider how we can maximise the use of MMC”.

The diversity of the industry, as well as the fact that many of its constituent businesses are small and locally-focused, means that any list of notable players will not be fully representative of the wide array of construction concerns in the UK.

That said, some examples of large players are set out below.

• Balfour Beatty – leading infrastructure group delivering major civil engineering and construction projects.
• Barratt Redrow – the nation’s largest housebuilder.
• Costain Group – technology-driven construction and engineering company.
• Kier Group – prominent infrastructure and construction firm, involved in a wide range of segments.
• Laing O’Rourke – the UK’s largest privately-owned construction firm, and a pioneer in modern methods of construction.
• Mace – major construction management and consultancy firm.
• Mears Group – the UK’s foremost provider of social housing maintenance and care services.
• Morgan Sindall Group – leading construction and urban regeneration company, active in both public and commercial sectors.
• Persimmon – prominent volume housebuilder.
• Sir Robert McAlpine – long-established family-owned building and civil engineering contractor.
• Vistry Group – one of the UK’s leading homebuilders.
• Willmott Dixon – large privately-owned construction and fit-out company.

ICAEW’s Library & Information Service can provide information on UK and Irish participants in the construction industry via its wide range of company information services. This includes:

• Information on company acquisitions in the sector
• Private company transaction multiples
• Company data
• Beta values for companies and the sector
• P/E ratios for companies and the sector

For more information, please contact our enquiry team on +44 (0)20 7920 8620 or at library@icaew.com to discuss your requirements.

• British Woodworking Federation (BWF)
• Build UK
• Building Services Research and Information Association (BSRIA)
• Chartered Institute of Building
• Chartered Institute of Plumbing and Heating Engineering (CIPHE)
• Chartered Institution of Building Services Engineers (CIBSE)
• Civil Engineering Contractors Association
• Constructing Excellence
• Construction Employers Federation (CEF)
• Construction Industry Council (CIC)
• Construction Industry Training Board (CITB)
• Construction Leadership Council (CLC)
• Federation of Master Builders (FMB)
• Home Builders Federation (HBF)
• Institute of Construction Management (ICM)
• Institution of Civil Engineers (ICE)
• Institution of Structural Engineers (ISE)
• National Federation of Builders (NFB)
• National Federation of Roofing Contractors (NFRC)
• Painting and Decorating Association (PDA)
• Royal Institute of British Architects (RIBA)
• Royal Institution of Chartered Surveyors (RICS)
• Scottish Building Federation
• Steel Construction Institute (SCI)
• Society of Construction Law