CIF Construction Outlook Quarter 2: Stable outlook for construction, but cost pressures and structural constraints weigh on growth

The CIF has today released its Q2 2026 Construction Outlook Survey, highlighting steady levels of activity across the sector.

There is also a clear need for policy intervention to support delivery and expand capacity.

Based on responses from 138 construction companies, the survey indicates that the sector remains broadly stable, with signs of modest growth and improving sentiment around turnover and forward orders. However, performance remains uneven, with stronger activity in Civil Engineering and Specialist Contracting, while other areas are more subdued.

Cost pressures continue to be a defining challenge, with persistent increases in labour and material costs driving upward pressure on project pricing. Public works participation also remains mixed, with a significant share of firms not engaged, reflecting ongoing concerns around margins and procurement processes,

Export activity remains positive, with most exporting firms reporting increased turnover in Q1. Looking ahead, firms are cautiously optimistic, expecting stable to improving activity levels, although cost inflation and structural market constraints are likely to weigh on the pace and scale of growth.

Commenting on the findings, CIF CEO Andrew Brownlee said:

“Construction firms remain active and cautiously optimistic, but the reality is that cost pressures and structural constraints are increasingly impacting delivery. Without reforms to support viability and participation – particularly in public works – there is a real risk to the pace of infrastructure and housing delivery. Looking ahead, demographic pressures from the mid-2030s will place further strain on public finances, underscoring the urgency of accelerating delivery today.”

Key Survey Findings

Business Turnover

• 25% reported a year-on-year increase in turnover in Q1 2026
• 36% expect turnover to increase in Q2 2026
• Home Building and Civil Engineering recorded the strongest year-on-year growth, particularly among smaller companies

New Orders

• 28% reported an increase in revenue from new orders in Q1 2026
• 32% expect further growth in Q2 2026
• New orders were broadly flat to slightly negative in recent months, but expectations are more positive, with overall increases anticipated
• Growth is expected to be strongest in Specialist Contracting and Civil Engineering, while Home Building remains relatively stable

Costs and Pricing

• 94% reported an increase in raw material costs in Q1 2026
• 96% expect further increases in Q2 2026
• Cost increases were widespread across sectors and firm sizes, with particularly strong pressures among larger firms
• 66% reported an increase in project pricing, with 72% expecting further rises
• Pricing is expected to continue increasing, with the strongest upward pressure among small to mid-sized firms

Employment

• 22% reported an increase in employment in Q1 2026
• 22% expect to increase staffing levels, while 65% anticipate no change
• Employment remained broadly stable overall, with modest growth expected in the coming months, particularly in Specialist Contracting
  

Read the full report here.