The UK construction market is expected to make a gradual recovery into 2027, although the pace of improvement is expected to vary significantly between sectors, according to the latest Savills Build: Perspective Index.
The index, which monitors sentiment on build costs and programme timescales across 64 UK markets and sectors, is forecast to fall from 36 to around 10 by the end of 2026, suggesting pressure on build costs and programme timescales is waning.
However, subdued economic growth, cautious investor sentiment and elevated financing costs continue to constrain project viability across the construction sector.
Competitive tendering is helping to contain cost inflation as contractors accept lower margins, meaning the overall picture remains one of cautious stability.
However, combined with the Bank of England’s latest interest rate rise, development viability is likely to remain challenging, particularly for speculative development, placing greater emphasis on refurbishment and value engineering strategies.
Simon Collett, executive director and head of professional services at Savills, said: “Global issues have, once again, impacted the UK construction sector. Whilst our index readings in 2026 have shown upward pressure on build costs and timescales the impact has not been as destabilising as first feared. Development viability remains the issue of the day and build costs are just part of the viability equation, but with inflation and financing costs trending upwards it is likely we will see a greater emphasis on refurbishment and value engineering strategies.”
