EUROPE
Average construction output continues to stagnate across Europe
The construction industry in Europe has again had a year of slow growth, albeit some countries have fared better than others.
GDP growth has been slow at an EU average of 1.5%, with Spain (2.8%) and Ireland (12.3%) being the outliers, and France, Italy and Germany (0.9%, 0.4% and 0.3% respectively) stagnating at lower levels (source: Eurostat).
This directly translates into equally slow construction output throughout the region, which showed a 1.3% average increase over the period, with major economies (France -1.3%, Spain -2.6%, Germany 0.4%) experiencing a flat line or reductions, while others (Sweden 3.6%, Poland 4.2%, Portugal 3.6%) have demonstrated greater growth (source: Eurostat).
Skilled labour shortages are still the talk of the industry and one reason as to the slow nature of growth on the continent. The European Commission recognises the need to harness the skills of women, migrants and the older population, who can all bring substantial benefits to the industry.
EU-wide, there continues to be an urgent need for home-building, which is thwarted by affordability and market pressures. There is further necessity to invest in the green economy, with continuing geopolitical uncertainty driving a need to remove reliance on key states for energy production.
UK market reflects conditions on continent
Turning to the UK, the data for 2025 is not dissimilar to that reported in Europe as a whole, with a yearly GDP growth of 1.3% and construction output up approximately 1.5% for the year, according to the Office for National Statistics (ONS). Contractor insolvency rates have not changed considerably during 2025, with some large and experienced names in the industry succumbing to market challenges, including cladding liabilities.
As of Q4 2025, the RLB Weighted Average Tender Price Index forecast uplift for 2025 is 3.17%, with a prediction of a weighted average of a 3.27% increase for 2026. The Building Cost Information Service suggests the input costs from the General Building Cost Index increased 3.91% in 2025 with an expectation of 2.9% for 2026, suggesting the market will continue to experience margin pressure, as costs movements outstrip available margin.
Project starts slowed by new safety rules
2025 has been a sustained slow period for residential new starts, with the Building Safety Act’s gateway requirements for higher-risk buildings creating uncertainty around timescales. However, the latter half of the year saw some improvement in the process. With numerous projects ‘stuck in the system’ for substantially longer than the promised 12 weeks, the second half of the year brought about an unblocking, with one project being successful within 13 weeks, demonstrating that with the right approach and collaborative teamwork, these timescales can be achieved. This will be a promising outlook for developers into 2026.
ONS new orders data was promising for the year, showing a 4.7% increase in infrastructure projects compared with the same quarter of the previous year and with the Autumn Budget showing further infrastructure spending plans, there are positives to be taken. In addition, data shows that the UK construction industry has demonstrated a marked improvement in productivity and gross value added compared with pre-Covid data and outperforms much of the economy.
“Skilled labour shortages are still the talk of the industry and one reason as to the slow nature of growth on the continent.”
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