UK Construction Industry Trends & Outlook 2025 

The Construction Products Association reported that total construction output is expected to grow by just 1.9% this year, with a modest growth of 3.7% forecast for 2026. These figures have declined considerably in recent revisions when compared to previous projections, with the CPA attributing the more conservative revisions to a slow start to 2025, strained economic conditions, and persistent issues around inflation. 

Compounding these challenges are rising costs across the supply chain. From April 2025, increases to the National Living Wage and employers’ National Insurance Contributions, alongside falling tax thresholds, are looking to tighten margins even further. 

The skilled labour shortage remains one of the most critical challenges facing the UK sector in 2025. Long standing shortages in the industry show little signs of immediate improvement, with the gap continuing to widen, particularly in specialist trades and retrofit roles. 

The 2024 Construction Skills Network (CSN) report, cited that around 225,000 new construction workers are needed in the UK by 2027 to meet the government targets set for housing and net zero retrofits. Of these, HVAC technicians account for more than 59,000 of those unfilled roles, threatening to derail progress on decarbonising the UK’s construction sector. 

Additionally, an ageing workforce, slow apprenticeship uptake, and reduced access to overseas labour are compounding these issues. As a result, employers across the UK are now under pressure not just to recruit, but to upskill their workforce and focus on retainment, with many turning to digital tools to upskill existing teams and reduce reliance on manual, admin-heavy processes. 

Meanwhile, rising wage costs, including increases to the National Living Wage and employer contributions, are putting additional strain on margins. This has highlighted the necessity for the construction sector to climb out of its productivity rut, making it clear that productivity gains are no longer a nice-to-have; they’re essential. 

Leveraging AI and Digital Tools 

To tackle this productivity issue head-on, construction companies should focus on integrating AI-enabled automation, robotics, and other digital software tools to help bridge labour gaps by boosting productivity and reducing reliance on physical labour. 

Technologies like automated project management systems, autonomous machinery, and augmented reality (AR) for on-site tasks can streamline operations, all whilst attracting younger workers interested in tech-forward industries. 

Engaging, Upskilling and Career Development Initiatives 

With a shortage of skilled workers available, offering training opportunities such as cross-skilling, on-the-job mentorship, and digital learning programs can equip your existing workforce with the skills needed to thrive in modern construction environments. 

The industry should also focus on increasing awareness about the potential within construction careers. The lack of interest from younger generations in construction careers is exacerbated by misconceptions about the construction industry. With many believing that construction roles are restricted to on-site labour, physically demanding, and offering little-to-no career advancement and low pay.  

This educational piece is crucial for the wider industry to get right, by reaching out to your local communities and embedding yourselves in colleges and universities.  

Exploring Alternative Talent Pools 

While it’s true that there is a shortage of skilled workers, it’s also partly our responsibility to step out of our comfort zone and engage alternate talent pools. 

Recruiting from outside the construction sector, including candidates transitioning from technology, manufacturing, or other industries, could offer construction firms a fresh approach to sourcing talent. 

As the industry evolves to accommodate innovations in tech and AI, so too does the skill-gap within the industry. By putting more focus on talent pools from outside the construction sector, alongside investing in diversity and inclusion initiatives, the construction sector can widen its talent pool by encouraging underrepresented groups, such as women or young graduates, to explore careers in construction. 

Rising material costs remain one of the most significant factors affecting project budgets and timelines in the UK construction sector. 

As demand for new housing, infrastructure, and commercial developments continues to rise, the industry faces ongoing price pressures across essential building materials, including steel, concrete, timber, and insulation. 

These challenges are being compounded by supply chain disruptions, environmental regulations, and the push for sustainability. 

Key Construction Materials Impacted by Rising Costs 

• Steel: Volatile steel prices continue to impact the sector, driven by global supply chain issues, energy costs in manufacturing, and tariffs. 
• Concrete: The transition towards eco-friendly concrete with a lower carbon footprint is increasing production costs, reflecting the adoption of newer, greener technologies. 
• Lumber: Lumber prices have surged in response to high demand for housing and supply chain constraints across international markets. 
• Insulation Materials: With the rise of energy-efficient and green buildings, insulation materials are increasingly in demand, adding further pressure to costs. 

While sustainable and eco-friendly materials are becoming critical for meeting green building targets, their higher price points present an added challenge. 

The latest  Construction Market Insights Report from global consultant Linesight predicts that copper, which hit an all-time high in Q2 2024, is expected to rise a further 2.2% by 2025. They also cite that lumber prices are set to increase because of the government’s new housing targets, which could have a knock-on effect to other materials such as plasterboard. 

As the industry confronts critical workforce pressures and rising costs, construction teams are now looking to technology to bridge the productivity gap more than ever.  

Once a slow adopter, the construction sector is now embracing digital transformation out of necessity. Reports show that productivity has remained flat in the construction industry over the last 50 years.  

Recently, ONS reported that construction output per hour has barely changed since 1970, a huge discrepancy the wider labour pools across the UK, where output per hour has more than doubled since 1970. 

For those already adopting digital transformation, integrated project control systems, mobile time-tracking tools and cloud-based collaboration platforms are helping businesses streamline their operations and improve productivity. 

At the same time, Building Information Modelling (BIM), data analytics, and AI-driven forecasting are becoming more widely adopted, especially among businesses tackling complex infrastructure and projects.  

With a struggle to employ skilled boots on the ground, smarter project planning and real-time visibility are proving critical for UK construction teams staying on track and on budget. 

Yet barriers remain and adoption, as always, remains slower compared to other industries. Fragmented systems, legacy processes and a lack of digital skills continue to hold many firms back. For these businesses still looking to catch-up, growing technology such as Construction ERP are becoming more and more vital.  

2025 has brought a wave of regulatory change and not all of it is well received among wider construction issues the sector faces.  

Building Safety Regulations 

The aftermath of the Grenfell Tower tragedy has led to groundbreaking changes that, while vital, are also deemed highly stringent, with their implementation particularly affecting high-rise residential developments.  

The Building Safety Regulator (BSR), the authority established to oversee these reforms, has faced persistent challenges in processing applications efficiently. This has led to a flurry of substantial delays in the BSR's approval processes, with developers reporting this as a key contributor to disruptions in project timelines and increasing costs for their projects.  

Procurement Act 2023 

A major change in public sector procurement procedures has now come into effect with the Procurement Act 2023. The act, which took effect in February 2025, intends to modernise and streamline procurement so that small businesses and social enterprises can more easily use it.  

It offers a more flexible purchasing structure, increased openness, and improved value for money in public spending particularly for smaller businesses.  

While mostly well-received, the act forces construction companies to adjust to new compliance rules and evaluation criteria, even if its goal is to promote a more efficient and competitive procurement environment.  

For small and medium-sized businesses, who must acquaint themselves with the new procedures and requirements, the transition period looks like it could add temporary strain on their business operations. 

Building Safety Act 2022  

Building safety remains a high priority in the UK, with the Building Safety Act 2022 (BSA) continuing to reshape the regulatory environment for higher-risk buildings (HRBs). 

While its main provisions came into force in October 2023, the construction industry now undergoes further developments in 2025 as the legislation beds in. 

Key Takeaways of the Building Safety Act  

• Gateway 2 Approval Process: Developers must obtain building control approval from the Building Safety Regulator (BSR) before construction begins on HRBs. The approval process ensures that the proposed design meets stringent safety requirements. 
• Enforcement and Compliance: The BSR is increasingly active in monitoring and addressing building safety concerns. The first enforcement actions are expected in 2025. 

Current Challenges Surrounding the Building Safety Act 

A recent report by Inside Housing, based on data from a Freedom of Information request submitted by the Fire Association, has revealed challenges in the Gateway 2 approval process: 

• From October 2023 to September 2024, only 14% of applications for HRBs were approved as compliant. 
• Delays may stem from capacity issues within the BSR, a surge in applications, and a lack of clarity surrounding application requirements. 

What this Means for UK Construction 

The stringent provisions under the Building Safety Act necessitate a focus on regulatory compliance, transparent communication, and proactive planning for higher-risk projects. In 2025, firms can expect: 

• Increased oversight and enforcement activity from the BSR. 
• Continued learning and adaptation as the BSA provisions are integrated into construction workflows. 
• Greater accountability for building safety and design standards.

With the UK’s 2050 net zero targets on the horizon, environmental performance is no longer a secondary concern for construction. In 2025, sustainability is on track to become both a commercial and regulatory requirement, not simply a moral obligation. 

In fact, according to the Global Sustainability in Construction Market Research Report, the sustainability in construction market size will grow at a CAGR of 8.91% for the period 2024–2031.  

As a result, sustainable materials and new  greener approaches to construction continue to trend upwards, as construction companies work to match rising consumer and stakeholder expectations. 

Developers and contractors are now facing mounting pressure to embed sustainability at every stage of a project. Green building certifications, low-carbon materials and whole-life carbon assessments are fast becoming standard practice on both public and private projects, adding new layers of complexity to delivery. 

2025 Sustainability Trends At-a-Glance: 

• Greater adoption of low-carbon construction materials: Including the wider use of cross-laminated timber (CLT), recycled steel, and innovative sustainable composites. 
• Shift towards off-site and modular construction: Helping to speed up project delivery, cut carbon emissions and reduce onsite waste. 
• Energy-efficient building designs becoming the norm: Passive design strategies, heat pumps, and renewable energy systems are increasingly expected in line with the Future Homes Standard. 
• Retrofitting existing properties gaining momentum: Upgrading older buildings to modern energy and safety standards is now central to achieving national carbon goals. 
• Growing demand for green building accreditations: Certifications such as BREEAM, LEED, and WELL are becoming a baseline expectation for both public and private sector projects. 
• Embodied carbon assessments influencing procurement: Environmental impact is playing a larger role in product selection, tendering and material specification. 
• Digital tools driving transparency and compliance: Life-cycle assessments, environmental product declarations (EPDs), and carbon reporting software are becoming embedded in project delivery and funding requirements. 

As the construction industry evolves, ERP systems offer a vital tool for future-proofing businesses in a rapidly changing environment. By facilitating the integration of emerging technologies such as BIM and Digital Twins, ERP systems enable construction companies to manage projects more efficiently, reduce risks, and enhance data accuracy. 

For small and medium-sized enterprises (SMEs), ERP acts as a bridge to digital transformation, breaking down barriers such as limited skills and resources. These systems empower teams to harness the full potential of technological advancements, fostering competitiveness and long-term sustainability. 

By centralising data and automating processes, ERP systems provide a streamlined approach to managing complex projects, from procurement through to financial tracking. 

For construction companies looking to remain at the forefront, choosing an ERP system that supports growth, efficiency, and innovation is crucial. With the right solution in place, businesses can navigate the evolving landscape with confidence, optimise their workflows, and ensure that their operations are built to last. 

As 2025 continues, tighter margins, shifting regulations and growing delivery pressures, put construction businesses under increasing strain. Making the right digital solutions more important than ever. 

Access Coins is a construction-specific ERP system designed to help you manage risk, improve visibility and make better-informed decisions. 

By centralising your data across finance, projects, and commercial functions, Access Coins enables you to: 

• Protect margins with real-time cost tracking and accurate forecasting 
• Stay compliant with latest changes in regulations 
• Streamline operations and free up time with automation and connected workflows 
• Build resilience and adaptability into your processes for the years ahead 

Whether you're grappling with labour shortages, environmental reporting or project complexity, Access Coins gives you the tools to respond faster, act smarter, and futureproof your business.