Summer 2025 Construction Sector Snapshot

Output Trends & Mixed Signals

Quarter 2 recovery: Total construction output in Great Britain grew by 1.2% in Q2 (Apr–June) compared to Q1, with new work up 1.1% and repair & maintenance (R&M) up 1.4% (ons.gov.uk). June bounce-back: After a decline in May (–0.6%), June saw a modest rise of 0.3% in output (ons.gov.uk).
Yet, these gains were tempered by: Struggles in major projects: While smaller-scale “underlying” projects (<£100m) surged—site starts up 49% quarter-on-quarter and 25% year-on-year—major project activity (starts, contract awards, planning approvals) lagged, pulling overall momentum down (pbctoday.co.uk). Contract awards/planning dips: Main contract awards fell 24% compared to the same quarter in 2024, and 32% from the prior quarter; planning approvals were down 22% over three months to June and 3% YoY (pbctoday.co.uk).

PMI and Construction Activity

Construction PMI slipped from 48.8 in June to 44.3 in July, signalling contraction—and marking the steepest decline since May 2020. The housing sub-index dropped to 45.3 (theguardian.com). Industry voices echoed alarm: contractors spoke of drying pipelines, staff reductions, and seven consecutive months of shrinking activity. Infrastructure consulting firm AECOM emphasized the need for long-term pipelines and labour capacity to unlock growth (theguardian.com).

Optimism in Residential and Underlying Works

Residential construction revival: Private housing starts skyrocketed—76% quarter-on-quarter, and 64% YoY—with the West Midlands and North West seeing the strongest growth (78% and 72% respectively) (lead-edge.co.uk). Policy support and forecasted growth: The Construction Products Association forecasts overall output growth of 1.9% in 2025, rising to 3.7% in 2026; private housing bolstering this with 4% (2025) and 7% (2026) growth (constructionwave.co.uk). Government projections (July 2025) raise estimates slightly: overall output growth at 2.1% in 2025, new housing up 1.4%, infrastructure 1.0%, and public non-residential at 3.7% (gov.uk). Backed by infrastructure planning: UK government launched a £725 billion, 10-year infrastructure investment strategy via the newly formed National Infrastructure and Service Transformation Authority (NISTA) in April 2025 (constructionwave.co.uk, media.arcadis.com). GlobalData projects a 1.6% real-term growth in 2025, underpinned by strong order books and investments in data centres, renewables and housing (globaldata.com).

Drivers of Growth & Recruitment Demand

1. Residential construction resurgence – Strong upticks in housing starts are powering demand for a wide range of roles—from bricklayers to project managers. The sector's rapid recovery, particularly among small-scale residential builds, is creating tangible recruitment pressure.

2. Public infrastructure impetus – The £725 billion infrastructure pipeline (as laid out by NISTA) offers long-term visibility, stimulating demand for engineers, planners, logistics coordinators, and skilled technicians to deliver on mega-projects (theguardian.com, en.wikipedia.org).

3. Skills shortages intensify recruitment needs – RICS reports a need for 20,000 more chartered surveyors, despite already having 100,000 members—highlighting bottlenecks in planning, approvals, and delivery (thetimes.co.uk). A Build-Up forecast warns the sector requires 48,000 additional workers per year to meet housing, infrastructure, and long-term demand (build-up.ec.europa.eu). Bricklayer roles are particularly impacted—numbers are at their lowest since 1998, with 30% expected to retire in this decade (thetimes.co.uk).

4. Modern Methods of Construction (MMC) – Challenges in traditional workflows have accelerated adoption of MMC techniques—such as timber-frame, modular off-site manufacturing, and panelised systems. These improve speed, labour efficiency, and help mitigate material constraints like brick shortages (en.wikipedia.org, lead-edge.co.uk).

5. Domestic supply chain bolstering – Investment in local manufacturing—e.g., Etex’s £170 million plasterboard plant near Bristol—and expansion by local brickmakers are strengthening supply chains and supporting workforce demand (theguardian.com).

Looking Ahead: Opportunities & Challenges

Looking to the rest of 2025 and beyond, the construction sector faces a mix of opportunities and risks. On the positive side, the strong pipeline in both residential and infrastructure sectors provides a solid foundation for output growth. Ambitious public spending commitments, particularly the £725 billion infrastructure plan, are expected to drive recruitment across technical, engineering and project management roles. Meanwhile, the adoption of modern construction methods and increased investment in local manufacturing offer productivity gains and resilience against global supply chain shocks. However, challenges remain. Persistent PMI contraction highlights cautious client sentiment, and performance on major projects continues to lag behind smaller-scale works. Labour shortages, particularly in technical roles like surveyors and bricklayers, threaten delivery capacity. Regulatory delays, including those at the Building Safety Regulator, are also holding back housing momentum. These headwinds mean the industry will need to balance optimism with realism as it looks to sustain recovery.

Conclusion

Summer 2025 reveals a UK construction sector in transition: residential and smaller-scale works are rebounding strongly, while major projects falter, pulled down by cautious investment and regulatory bottlenecks. Underpinning the rebound are ambitious infrastructure plans, steel commitments to housing, and shifts toward modern construction methods—all pointing to sustained growth, provided labour and regulatory gaps are addressed. Recruitment demand is outpacing supply across multiple disciplines—from bricklaying to surveying—driven by both structural investment and skill attrition. Unless these deficits are alleviated, growth may be fragile.