For the first 40 days of 2026, the UK didn’t have a single day without rain. It was a relentless start to the year that might once have inspired a biblical omen. 

It was against that backdrop that the Office for National Statistics released its growth results, which showed UK GDP grew by 1.3% in 2025, with just 0.1% growth in the final quarter. 

Construction painted an even gloomier picture, with output falling 2.1% and private housing down 3.6%.  

In stark contrast to the Chancellor’s forecast of a sunnier economic outlook this year, the lukewarm ONS figures should be particularly worrying for a government committed to delivering 1.5 million homes. 

So, what’s been holding the sector back? And (short of housebuilders moving into the biblical arks business), will the industry see a change in the barometer? 

A fragile operating environment 

With skills shortages, spiralling inflation and increased costs of materials and labour, the construction sector has certainly had its fair share of challenges.  

Tackling volatile headwinds, developers and investors have also braced themselves against a delayed Budget, putting a longer-than-expected pause on investment decisions. 

Although other sectors have been nimbler in response, it will take a while for the momentum to pick up again in the construction industry, especially with devolution and planning reform complications thrown into the mix. 

Planning reform: early signs of positivity? 

Revisions to the National Planning Policy Framework (NPPF) sit at the centre of the government’s ‘build baby build’ housing strategy. With planning reforms firmly on the agenda, we have seen signs of increased planning applications, but this will take a while to wash through. 

In the year ending September 2025, just over 250,000 decisions were granted by district-level authorities, down 4% on the year before. According to the HBF, new home permissions in the second quarter of the year hit a 13-year low, making up just 60% of the numbers we need to sustain the government’s 1.5 million target. 

Statistics suggest planning decisions are also taking close to a year on average, with most applications exceeding statutory timelines, mostly due to under-resourced local authority planning departments. 

Determinations have also slowed due to statutory consultations, with appeals, judicial reviews and infrastructure constraints adding further complications. 

Proposals around so-called “Grey Belt” land and a brownfield-first approach show the government’s willingness to tweak policy levers, but the key question is whether they will translate into increased approvals and housing starts this year. 

Supply, demand and viability 

The challenge isn’t confined to wholesale reforms to the planning system. Although the UK’s housing need is well reported (over 1.3 million households on social housing waiting lists and more than 170,000 children in temporary accommodation), affordability in the private sector is limiting demand.  

Even if a deposit can be saved up, there’s an estimated £70,000 gap between what a typical first-time buyer can borrow and the price of an average home. This gap affects the entire delivery model. Developers often rely on steady sales from these buyers to unlock additional phases. However, stickier inflation means lenders remain cautious, leaving buyers faced with stretched borrowing. 

As a result, the government is pushing higher loan-to-value mortgages (sometimes as much as 98% products), alongside lengthier mortgage terms. These measures may improve access for some, but they don’t answer the price-to income imbalance issue. 

A return to subsidies such as Help to Buy could help but remain contentious. Critics argue it risks elevating prices, but those in favour suggest without intervention, transactions will remain sluggish. It’s a delicate policy to balance. 

Elsewhere, a recent report found the Government ‘hasn’t much to show’ for its £8.4bn investment into unlocking land, with just 33,000 homes built.  

At the same time, the industry is also dealing with higher build costs, infrastructure contributions and affordable housing requirements. It goes without saying that weather-related issues have also had a significant impact on delivery pressures. 

Taken together, it means that, in some locations, developers are having to ask fundamental questions surrounding overall viability. 

Aligning priorities for the year ahead 

Although the situation still paints a gloomy picture, there may be a silver lining this year, with early signs that inflation is starting to cool. 

With limited changes to the tax burden or spending commitments expected, the Chancellor’s Spring Statement (3 March) could also point to renewed positivity in what appears to be a steadying economy. 

That said, the benchmark of 1.5 million remains a clear and daunting target for the industry. 

Come rain or shine, we must now see the private and public sectors come together to make meaningful inroads through pragmatic solutions that help streamline approvals, accelerate starts and drive completions.