With the recent UK Budget announcement, now is a good time to focus on the outlook for UK construction and construction equipment sales in 2026. Against a backdrop of slowing economic growth, easing but still elevated inflation, and subdued construction activity, we explore how housing trends and public policy are shaping demand.

UK macro-economic backdrop

UK GDP grew by just 0.1% in Q3 2025, down from 0.3% in Q2, marking a 1.3% increase year-on-year. Inflation, measured by CPIH, eased to 3.8% in October, down from 4.1% in September, signaling some relief for input costs but not enough to spur significant capital expenditure.

Total construction output

Construction output in September 2025 reached £18.87 billion, a modest 0.2% increase month-on-month and 1.3% year-on-year. Year-to-date output stands at £169.2 billion, only 1.5% higher than 2024, continuing a four-year trend of near-flat growth (+3% since 2022). While 2025 has been a better year for equipment sales compared with 2024, a generally sluggish construction market in the UK means that 2026 is unlikely to be a stellar year for new equipment sales.

Total construction output has been sluggish since 2022

Housing market trends

Housing starts rose 8% between Q1 and Q2 2025 (35,640 → 38,490 units) and were 14% higher than Q2 2024. Brick deliveries – a proxy for housing activity – grew 1.3% in September, but the 12-month rolling average has plateaued over the past four months. New housing orders fell 2.6% in Q3, driven by a 5.4% decline in private housing, partially offset by a 10.4% increase in public housing.

Brick deliveries have plateaued over the last 4 months

The revised forecast from the Office for Budget Responsibility (OBR) projects 1.49 million net additional dwellings between 2024/25 and 2029/30. However, housebuilding is unlikely to return to 2022 peak levels until 2028, when planning reforms accelerate land release.

OBR revised forecast for net housing additions from the November 2025 Budget

New housing is typically a major driving force behind the UK construction equipment market. As sluggish economic conditions persist and interest rates remain high, 2026 is likely to continue to see anemic activity in the housing market.

Infrastructure performance

Infrastructure remains the most resilient segment. Output reached £9.93 billion in Q3 2025, up 4.2% from Q2, with a near-even split between public (£4.7 billion) and private (£5.2 billion) investment.

UK infrastructure output is gaining momentum

Roads (+30.2%) and electricity (+28.2%) drove growth in infrastructure output during Q3 2025, while water infrastructure declined slightly (-1.8%), although its impact is minimal given its small share of total output.

Roads & electricity infrastructure driving growth in Q3 2025

While current output reflects work already underway, the medium-term outlook for civil engineering is shaped by major projects. During her 2025 Budget speech, Rachel Reeves, the UK Chancellor, mentioned infrastructure as the backbone of economic growth in the country, and announced continued investment into the sector. This includes allocations to some of the largest transport projects including the Lower Thames crossing and Northern Powerhouse Railway.  Sustained growth in civil engineering output is significant for machinery demand, with infrastructure projects driving demand for heavy equipment.

Key takeaways

A weak housing market in 2026 will slow investment in new machinery from major housebuilders and their contractors. Infrastructure projects will drive demand – particularly for larger machines – but not enough to make up for a fragile housing market. Overall, we predict 2026 will see moderate machinery sales growth in the UK, but not at the same pace as 2025.

To find out more about the latest Interact Analysis Off Highway Vehicles Report, contact Alastair Hayfield.