Construction output fell sharply in the final quarter of 2025 driven by a decline in private housebuilding and weaker new orders, latest data from the Office for National Statistics reveals.
Total output dropped by 2.1% in Q4 (October to December) compared with the previous quarter. Both new work and repair and maintenance activity declined, down 2.6% and 1.5% respectively.
Seven of the nine construction sectors recorded falls over the quarter, with private new housing the largest negative contributor, down 3.6%.
On a monthly basis, output slipped by 0.5% in December, following a revised 0.8% fall in November and a 1.6% decline in October. The December contraction was driven entirely by a 2.5% drop in repair and maintenance, while new work rose by 1.0%.
PRICE PRESSURES
Despite the quarterly slowdown, annual output for 2025 as a whole was up 1.8% compared with 2024, marking the fifth consecutive year of growth.
Price pressures remained moderate, with construction output prices rising by 2.7% in the 12 months to December 2025.
Forward-looking indicators were less encouraging. Total construction new orders fell by 3.8% (£469m) in Q4 compared with Q3. The decline was led by weaker private commercial and private industrial new work, signalling softer demand heading into 2026.
For developers and lenders operating in the bridging and development space, the fall in private new housing and new orders may point to a more cautious start to the year, even as annual growth remains intact.
DISAPPOINTING FOR HOUSEBUILDING
Neil Leitch (main picture, inset), managing director of development finance at Hampshire Trust Bank, says: “These figures underline what has been evident throughout 2025. It has been a disappointing year for housebuilding, characterised by a widening gap between ambition and delivery.
“Developers want to build and demand from homebuyers remains clear, but the conditions required to move schemes forward with confidence are still not in place.
“Recent data highlights the strain across the sector. Housebuilding remains the weakest part of construction, and the Home Builders Federation has warned that viability pressures are mounting.
“Low approval levels, rising costs and policy burdens are combining to make it harder for builders to bring forward new schemes, particularly at a time when certainty and timing matter most.”
LASTING DAMAGE
And he adds: “The real issue is that delay does lasting damage. Each pause in decision-making erodes viability, reduces pipeline and weakens delivery capacity, especially among SME developers.
“For smaller and regional developers, that uncertainty is far harder to absorb, because prolonged delays directly constrain cash flow, site turnover and the ability to reinvest. Improving output will require sustained investment in planning capacity and far greater consistency across the system.
“Developers need confidence that approvals will translate into starts.”
“Developers need confidence that approvals will translate into starts and that delays can be managed realistically. What is often overlooked is the time lag in development. Decisions delayed today will feed through into weaker output in the years ahead.
“Without a renewed focus on delivery, confidence and consistency, the risk is that housing supply continues to fall short regardless of how strong the stated ambitions may be.”
