The construction sector recorded modest growth in the third quarter of 2025, driven by repair and maintenance activity, even as new housing projects continued to decline, according to the Office for National Statistics (ONS).

Total construction output rose by 0.1% between July and September compared with the previous quarter.

While repair and maintenance work increased by 0.6%, new construction fell by 0.2%, reflecting ongoing pressures in the housing market and tight lending conditions.

The ONS said that output expanded in four of the nine construction sectors during the quarter. The strongest growth came from private housing repair and maintenance, which increased by 2.9%, as homeowners continued to invest in renovations and energy efficiency improvements.

HOUSING STARTS

The largest drag came from private new housing, which declined by 1.9%, extending a slowdown that began earlier in the year.

On a monthly basis, construction output grew by 0.2% in September, recovering from a downwardly revised fall of 0.5% in August. The rise was driven entirely by new work, which increased by 0.7%, while repair and maintenance activity slipped 0.5%.

Despite the subdued output figures, new orders showed signs of strength. Total new construction orders rose 9.8%, or £1.1 billion, in the third quarter compared with the previous three months.

The increase was led by private commercial and private industrial projects, suggesting that business investment in new facilities may be improving as interest rate expectations stabilise.

INDUSTRY STABILISING

The ONS also reported that the annual rate of construction output price growth – a measure of cost inflation across materials and labour – stood at 2.7% in the 12 months to September. That marks a continued easing from the double-digit inflation rates seen in 2022 and 2023, when supply chain bottlenecks and rising energy costs drove up prices.

Economists said the latest data indicated that the construction industry was stabilising but still under strain from high borrowing costs and weak residential demand.

“While order books are starting to rebuild, new housing remains the weak spot,” said one sector analyst.

“Developers are cautious, and higher financing costs continue to weigh on large-scale residential projects.”

The ONS said that total construction output remains below pre-pandemic peaks in real terms, though the pipeline of commercial and industrial work suggests a potentially stronger end to the year.

FRAGILE CONFIDENCE

Neil Leitch (main picture, inset), managing director, development finance at Hampshire Trust Bank, said: “As these figures show, construction remains under real pressure. Last week S&P’s construction PMI reported the tenth consecutive month of decline, with housing seeing its steepest fall in eight months.

“Confidence is fragile, and viability is tightening. Rising costs, extended timelines and local delays mean many schemes simply do not stack up, even when demand is strong.

“From regulation and planning to securing skilled workers, developers, and particularly SMEs, face mounting challenges. The appetite is there from developers, and the need is clear among homebuyers and tenants.

“Lenders have the capacity to fund viable schemes, but uncertainty over timing and delivery continues to hold projects back. The pressure is not evenly spread. Developers in some regions face longer waits for planning and greater pressure on labour, making it even harder for smaller firms to stay active.”

OPPORTUNITY KNOCKS

And he added: “For all the Budget speculation around tax, the real opportunity lies in construction. With proper investment, the Government can help secure the housing delivery pipeline, resource planning departments, and tackle the skills shortage that threatens long-term capacity.

“Each new initiative brings promise, but the reality on the ground has barely shifted. Real progress depends on partnership between policymakers, lenders and developers, and what the sector needs now is follow-through, not another reset. The sector underpins jobs, housing and investment, and it needs stability, consistency and the confidence to deliver.”