The UK construction industry showed signs of improvement during the second quarter of 2026, but workload levels remain firmly in negative territory, highlighting the fragile nature of the sector’s recovery. The latest RICS UK Construction Monitor found that the headline construction workloads net balance improved from -12% in Q1 to -4% in Q2. However, this was the fifth consecutive quarter in which the measure remained negative.
RICS describes the improvement as a partial unwinding of the sharp deterioration recorded in the first quarter rather than evidence of a sustained recovery. For construction businesses, therefore, the latest figures offer some encouragement but little reason for complacency.
Infrastructure Leads UK Construction Recovery
Infrastructure continues to provide the strongest area of activity, with workloads recording a net balance of +16% in Q2, up from +4% in Q1 and the strongest result for seven quarters.
Energy infrastructure was particularly strong, rising from +24% to +39%, while water and sewage increased from +20% to +23%. Communications also strengthened significantly, reaching +22% compared with +8% in Q1. Rail moved into positive territory at +10%, while roads increased modestly to +7%.
This reinforces the increasingly important role being played by major infrastructure investment in supporting the wider construction industry. However, the strength of infrastructure also highlights the uneven nature of the recovery, with private-sector construction continuing to struggle.
Private housing remained the weakest major sector, although its workload balance improved from -19% to -12%. Private commercial workloads improved from -15% to -7%, while private industrial increased from -15% to -9%.
There was a more positive picture across public-sector work. Public housing moved into marginally positive territory at +1%, compared with -2% in Q1, while other public works increased from -1% to +9%.
Construction Outlook Improves
One of the more encouraging aspects of the RICS Construction Monitor is the improvement in expectations. The headline twelve-month workload expectations balance increased sharply from +2% in Q1 to +13% in Q2, suggesting that construction professionals expect activity to strengthen over the coming year.
Infrastructure remains expected to be the principal engine of growth, with its twelve-month workload expectations rising from +19% to +34%.
Expectations also improved across private residential and non-residential construction. Private residential expectations moved from -2% to +6%, while private non-residential increased from -4% to +11%.
The gap between current workloads and expectations is significant. While the current balance of -4% indicates that more respondents are still experiencing falling workloads than rising workloads, the +13% forward-looking balance suggests that confidence in a recovery is beginning to return.
The question for construction businesses is whether those expectations will translate into actual projects, particularly in the private sector where viability, financing and regulatory obstacles continue to delay developments.
Financial Constraints Remain A Major Barrier
Financial pressures remain one of the biggest constraints on construction activity. RICS found that 67% of respondents identified financial constraints as a barrier, while 61% highlighted planning and regulatory issues.
Credit conditions have nevertheless improved considerably. The three-month outlook improved from -51% in Q1 to -21%, while the twelve-month measure increased from -42% to -13%. Although both remain negative, the change suggests that respondents expect financial conditions to become less restrictive.
Cost pressures also remain substantial. Expected materials cost inflation fell from 7.5% to 6.7%, but remains high by historical standards. Labour cost expectations were broadly unchanged, at 5.2% for skilled workers and 3.9% for unskilled labour.
Labour shortages remain an issue for more than a third of respondents, increasing slightly from 34% to 36%, while material shortages increased from 18% to 25%.
Housebuilding Remains A Concern
The continuing weakness in private housing is arguably the most significant warning contained within the latest RICS report, particularly given the Government’s ambitions to increase housing supply.
RICS Chief Economist Simon Rubinsohn said: “The latest results continue to demonstrate the ongoing challenges facing much of the construction industry. Rising material costs are exacerbating existing financial hurdles and being reflected in further pressure on profit margins.”
He added: “Infrastructure continues to show a degree of resilience with workloads benefiting from a number of substantive projects.”
However, Rubinsohn warned that there is “little evidence of any improvement in sentiment in the housebuilding sector”, highlighting the challenge facing the new Prime Minister in attempting to reignite construction activity and significantly increase social housing delivery.
Regulation remains another obstacle. Rubinsohn said respondents continue to point to regulatory barriers affecting development timelines, with problems surrounding the Building Safety Regulator still frequently cited despite improvements to the process.
What Does The RICS Report Mean For Construction?
The Q2 Construction Monitor presents a construction sector that is improving, but not yet recovering on a broad basis.
The movement from -12% to -4% in the headline workload balance is undoubtedly positive. However, the fact that workloads remain negative for a fifth consecutive quarter demonstrates that the industry is still operating below the level required for a genuine broad-based recovery.
Infrastructure is providing a crucial source of activity, while public-sector workloads are beginning to improve. Yet private housing, commercial and industrial construction remain in contractionary territory.
The improving twelve-month outlook is therefore important. If better credit conditions, infrastructure investment and greater regulatory certainty translate into projects getting underway, the second half of 2026 could mark the beginning of a more meaningful recovery.
For now, however, the RICS data suggests the construction industry is moving in the right direction without having reached a clear turning point. The workload balance may have improved significantly, but at -4%, it remains a reminder that the sector still has considerable ground to recover.
