The Construction Leadership Council’s (CLC) Material Supply Chain Group has warned that the UK construction industry faces a prolonged downturn unless urgent action is taken to stimulate demand, following continued falls in output and weakening market confidence.
In its first report of the year, the group, co-chaired by John Newcomb, chief executive of the Builders Merchants Federation, and Peter Caplehorn, chief executive of the Construction Products Association, highlighted a bleak outlook for construction activity across most sectors.
Construction output falls despite wider economic growth
The warning follows a sharp decline in construction output in the final quarter of 2025. While the wider UK economy grew by 0.3% in November, construction output fell by 1.3%, underlining the sector’s continued divergence from broader economic performance.
The group said this contraction reflects deep-rooted structural issues rather than short-term disruption, including delayed investment decisions, heightened client caution, ongoing economic volatility and weak consumer confidence.
Concrete and brick data points to reduced activity
Concrete orders, widely viewed as a bellwether for construction activity, have fallen by around 28% nationally over the past four years.
In London, traditionally the UK’s strongest construction market, volumes have declined by 39% in the past two years.
While there are currently no significant product availability issues, the group noted that supply in many areas is exceeding demand.
Brick manufacturers that invested in additional capacity following government housing commitments are now holding high stock levels and reassessing production volumes in response to subdued market conditions.
Capacity risks grow as manufacturers scale back
The report warns that prolonged weakness in demand is forcing manufacturers to reduce output, mothball sites, delay investment and, in some cases, make redundancies.
For businesses operating from a reduced base, increasing capacity again could take up to six months if demand recovers.
The longer the downturn continues, the greater the risk that lost capacity and skills will not be easily restored, shifting concerns from short-term disruption to longer-term structural damage across the supply chain.
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Cash flow pressures and administrations continue
Rising costs, weak demand and persistent cash flow pressures are continuing to affect the materials supply chain, with a steady number of company administrations reported in recent months.
As a result, suppliers are increasingly focused on margin protection and cost control.
The group said these pressures are compounding uncertainty and discouraging investment across the sector.
Delayed project timelines hit contractors
Although some major schemes have formally started, the group highlighted growing concerns around extended pre-construction services agreement (PCSA) periods. Longer lead-in times mean physical construction activity is delayed, pushing back revenue and increasing risk for major contractors.
This timing lag is contributing to the lack of visible recovery on sites, even where funding or approvals have been secured.
Housing weakness undermines overall recovery
While some large infrastructure programmes, including the prison estate programme, are progressing, the group said this is insufficient to offset weakness in housing.
The government’s target to deliver 1.5 million new homes remains significantly off track, constrained by planning capacity, regulatory delays and low investor confidence. Residential RMI activity also remains subdued.
As a result, the group concluded there is currently no meaningful recovery across the major construction sectors.
Call for targeted stimulus to restore confidence
The report noted that potential recovery drivers include increased water sector investment, higher infrastructure spending and the Planning and Infrastructure Act, which could unlock stalled schemes in the medium term.
However, it stressed that sustained recovery will depend on renewed investment in new homes and residential repair, maintenance and improvement.
With consumer confidence remaining low, the group said targeted stimulus measures are now essential to restore momentum, protect jobs and unlock suppressed demand for construction materials and labour.
