Slow housebuilding activity darkens construction outlook as financial pressures mount, says RICS

Construction workloads fell in the third quarter of 2026 as housing activity slowed down amid financial concerns, according to the latest RICS UK survey.

The headline workloads indicator fell to a net balance of -7% from -4% in Q2, marking the sixth consecutive quarter in negative territory. This means more respondents to RICS’ construction monitor survey reported a decrease in workloads than an increase.

Private housing remained the weakest sector, with its workload net balance declining to -18% from -12% the previous quarter, while public housing dropped to -6% from +1%.

For private commercial construction, the net balance slipped three percentage points to -10%. However, private industrial activity improved slightly at -7%, up from -9%.

Infrastructure reached its strongest workloads reading in eight quarters, up to +18% from +16%.

Meanwhile, more survey respondents are expecting credit conditions to get worse, both now and over the next year.The net balance for the outlook over the next three months fell from -21% to  -36% as the twelve-month outlook weakened to -32% from -13%.

According to RICS, survey feedback linked these concerns to rising gilt yields during the quarter and the associated increase in borrowing costs.

Financial constraints and planning and regulation were each cited by 62% of respondents as factors limiting building activity, while Building Safety Regulator approval timescales, nutrient neutrality and biodiversity net gain requirements were also blamed for delays.

Insufficient demand was reported as a constraint by 41% of respondents, while 36% cited labour shortages. However,respondents anticipated a slight improvement in overall workloads over the next year, with the expectations net balance up to +13% from +12%

Profit margin expectations dipped to -13% from -10%, while materials costs are anticipated to rise by 6.5% over the next year, overall construction costs by 5.8% and tender prices by 5%.

Simon Rubinsohn, RICS chief economist, said: “RICS data continues to show the financial pressures on housebuilders as the key factor holding back development with increased regulatory costs significantly impacting viability alongside rising material prices. The Your First Home scheme, while welcome, cannot alone improve the housing construction pipeline which is running someway below what was projected by the government.

“The latest RICS survey also highlights the ongoing challenges around securing planning permissions despite the passage of the Planning and Infrastructure Act, which has improved approval and response times. Critically, the results point to the pressure on profit margins remaining intense through the course of 2027, which will likely compel developers to remain highly selective in their focus.”