Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.

UK Construction Starts Fall Sharply, Glenigan Index Reports Ongoing Stagnation

UK construction starts fell in July, according to the latest Glenigan construction index. The report indicates that a recovery in the second half of the year is looking increasingly unlikely.

The Glenigan index shows the sector is experiencing weak economic growth and ongoing geopolitical uncertainty. Residential construction starts dropped by 31% in the second quarter, with project values halved compared to 2025 levels. The main driver of this decline was private housing, which continues to stagnate due to high, though currently held, interest rates affecting buyer demand.

Rising labour and material costs are also making developers hesitant to begin new projects until the market stabilises. Construction starts fell 40% compared to the previous three months and were 63% lower than a year ago.

Social housing starts also contracted, though less severely. Rising material costs and a backlog of delayed projects contributed to an 11% fall in starts compared to the previous three months, and an 18% decline year-on-year.

The Glenigan index notes that instability abroad and a government in transition are contributing to the lack of immediate relief for the sector. The report highlights that almost every residential and non-residential area is feeling the effects of rising prices, limited resources, and reduced investment, leading to stagnation.

Glenigan’s economic director, Allan Wilen, stated that a sharp decline in residential projects led the sector’s downturn in the second quarter. He attributed this drop to the impact of the Iran War on consumer confidence and developers adjusting their programmes in response to a slowing housing market. Wilen also noted that while this year is expected to end with negative numbers, forecasts predict a return to growth next year as economic conditions improve, inflationary pressures and interest rates ease, and funding from the Spending Review increases. He suggested that some revival could be seen in the fourth quarter, with a larger uptick expected in 2027.

These trends are relevant for UK letting agents and inventory clerks, as ongoing stagnation in construction may affect housing supply and market activity in the coming months.