The UK construction sector enters 2026 facing a challenging mix of cost pressures, labour shortages, and regulatory change, but also opportunities to adapt through technology, sustainability, and operational resilience. “This year will be defined less by headline growth and more by how firms manage risk and deliver reliably,” says Laura Capper, Head of Construction at NatWest Group. Public projects anchor the market Infrastructure, healthcare, education, and energy projects continue to provide a stable foundation for construction activity. While private housing and industrial sectors are recovering, commercial demand remains uneven. “Government commitments give firms a pipeline, but converting this into work on site requires flexibility and careful planning,” Capper explains. This balance between public stability and private sector caution will shape investment, scheduling, and workforce planning throughout 2026. Cost pressures remain elevated Rising labour, material, and energy costs continue to challenge firms. Contractors are embedding contingencies into contracts and improving cost management to maintain margins. “Managing inflation isn’t just about pricing,” Capper notes. “It’s about planning, risk management, and execution on site.” Long-duration projects are particularly exposed to cost fluctuations, making accurate forecasting and early-stage procurement more important than ever. Workforce and skills under the spotlight Labour shortages remain a structural issue. Skilled trades, technicians, and supervisory roles are in short supply, with demographic trends and reduced migration inflows intensifying competition. “A future-ready workforce combines technical ability with flexibility,” says Capper. “Apprenticeships, retraining, and flexible working are essential to keep projects on track.” Retention and succession planning will be crucial for SMEs and larger contractors alike, ensuring continuity in delivery and operational performance. Digital and AI tools support delivery Technology is being adopted pragmatically, with BIM, digital twins, drones, IoT monitoring, and AI-assisted planning helping firms reduce risk, improve safety, and enhance efficiency. “Technology is about smarter delivery, not growth,” Capper explains. “Firms that use digital tools effectively can make better real-time decisions and avoid costly rework.” Digital integration across design, planning, procurement, and on-site operations is gradually becoming a differentiator. Sustainability as a delivery requirement Carbon reduction, energy efficiency, circular design, and whole-life carbon assessment are increasingly embedded in project planning. “Sustainability is now part of operational delivery,” says Capper. “Low-carbon materials, energy-efficient designs, and retrofit initiatives are expected by clients and increasingly enforced by regulators.” This is particularly true in public sector and infrastructure projects, where environmental compliance is closely monitored. Client expectations are evolving Clients are demanding more transparency, reliability, and speed. Contractors who can deliver on time, on budget, and with reduced environmental impact will stand out. “Predictable outcomes, strong communication, and responsiveness will define success in 2026,” Capper adds. Collaboration with supply chains and digital reporting tools are helping contractors meet these expectations while managing risk. Looking ahead 2026 is set to be a year of practical resilience, not headline expansion. Firms that combine strong planning, workforce development, digital adoption, and sustainability compliance are best positioned to navigate uncertainty. “Adaptability is the sector’s greatest strength,” Capper concludes. “Those who focus on delivery, risk management, and operational performance will maintain stability and reputation in a challenging year.” Building, Design & Construction Magazine | The Choice of Industry Professionals

More than 1,600 UK businesses filed for administration in 2025 – a 5% decrease compared to last year – according to analysis by full-service law firm Shakespeare Martineau. However, the figure (1,631) remains 22% higher than in 2022, signalling that UK companies are still facing significant pressures despite some signs of economic stabilisation. Notably, retail filings surged by 24%, rising from 237 in 2024 to 293 in 2025, making it the hardest-hit sector by a clear margin, according to data from The Gazette Official Public Record. Greater London remained the region with the most business failures, recording 390 administrations in 2025, compared with 393 in 2024. Andy Taylor, partner and head of restructuring at Shakespeare Martineau, said: “While the year-on-year drop in administrations is worthy of note, the overall picture for business remains challenging. “With 1,631 appointments being made, we are still seeing more businesses enter administration than in 2021 and 2022, and distress remains widespread across multiple sectors and regions.” Along with retail, hospitality, manufacturing, real estate and construction were the worst-hit sectors, collectively accounting for 56% of all administrations. All sectors, apart from retail, saw a slight decline in filings compared to last year. Andy said: “The retail sector remains under significant pressure. Despite a slight easing of inflation and interest rates, consumers remain cautious and price-sensitive. Footfall continues to lag and many businesses have not been able to adapt to the new retail landscape. “The drop in filings in hospitality, manufacturing, real estate and construction could be the result of earlier failures having already removed the weakest operators. It may also reflect a slowdown in activity, with firms putting investment and hiring decisions on hold due to continued uncertainty.” Geographically, Greater London filings fell 1% (393 to 390). The North West increased by 15% to 286, along with the South East by 11% to 207. Yorkshire and the Humber (121) and the West Midlands (120) made up the rest of the top five. Andy said: “While Greater London continues to record the highest number of administrations, the regional picture is becoming more mixed. “The increases in the North West and South East suggest that financial distress is spreading beyond the capital, particularly in areas with high concentrations of consumer-facing and industrial businesses. “This underlines that the challenges facing companies are not confined to one region and that pressures remain widespread across the UK economy.” Despite an overall drop in administration volumes, Andy warned businesses not to be complacent. He said: “These figures, while worthy of note, do not detract from the fact that the trading environment for many businesses remains highly challenging. Many companies are surviving through short-term fixes, but without sustained growth, improved consumer confidence and better access to funding, there are still choppy waters to navigate. “Geopolitical uncertainty, post-election policy shifts, energy costs, the aftermath of the recent budget, and continued weak economic growth are still creating an unpredictable environment for business. Firms must remain agile and, above all, proactive. “Our advice remains unchanged – seek expert help early. The sooner directors act, the more tools are available to protect the business and find a viable path forward.” Businesses filing for administration in 2025 By sector Total By region Total Administrative 17 British Isles 4 Agriculture 8 East Midlands 93 Arts and entertainment 53 East of England 112 Automotive/transportation 87 Greater London 390 Construction 143 North East 57 Education 31 North West 286 Engineering 45 Northern Ireland 31 Financial 100 Scotland 67 Health and social 116 South East 207 Hospitality 169 South West 113 Information and communication 75 Wales 30 Manufacturing 164 West Midlands 120 Mining and quarrying 2 Yorkshire & The Humber 121 Others 2     Professional services 71     Public admin and defence 10     Real estate 147     Retail 293     Utilities 98     Total 1,631 Total 1,631 Building, Design & Construction Magazine | The Choice of Industry Professionals

Laura Stone, COO at Greencore Homes, comments: “The Government’s ambition to invest £13 billion in creating ‘zero bill’ homes represents a significant opportunity to improve comfort, cut energy costs and accelerate progress towards Net Zero. Retrofitting existing properties to achieve this can be complex, disruptive and expensive. Technologies such as heat pumps and solar panels can only truly reduce bills when the home itself is sufficiently insulated and airtight. “That’s why future-proofing new homes from the outset matters. Designing new homes properly now is far more cost-effective and far less disruptive than trying to fix performance issues later down the line. Long-term energy performance, not short-term compliance, is what ultimately protects households and ensures public investment delivers real value for the long-term. “Action must go beyond retrofitting technologies alone and focus much more on building energy-efficient, future-proofed homes from the very start of construction. When homes are designed with high levels of insulation, natural materials and integrated renewables, zero energy bills become achievable without the need for costly upgrades. “At Greencore Homes, we’re proving that our homes can deliver EPC A performance, low running costs and comfort from day one. Our homes are built to Passivhaus standards using natural, non-toxic materials to ensure superior insulation, airtightness and comfort. Standard features include triple-glazed windows, air source heat pumps, optimised solar PV panels and EV charging points, reducing bills and carbon while giving people homes that are healthier and more comfortable to live in. Warm homes should be treated as critical national infrastructure – every year of delay is a missed opportunity to improve living standards, strengthen energy security and accelerate the UK’s progress towards net zero.” Building, Design & Construction Magazine | The Choice of Industry Professionals