16th September 2026 – Arcadis has published its Autumn 2026 Market View, warning that the UK construction sector is at risk of a double dip as weak demand, falling orders and renewed cost pressures undermine confidence, despite the wider economy proving more resilient than expected in the first half of the year.

The report, titled Double Dip, shows a growing gap between the performance of the UK economy and the construction sector. GDP unexpectedly rose by 0.4% in Q2 2026, following growth of 0.6% in Q1, but construction activity remains flat and the forward pipeline has deteriorated sharply.

After a weak start to the year, new-build output increased by just 0.4% quarter on quarter in Q2 but remains 6% below the same period last year. More significantly, new orders fell by 11.9% in Q2 and were down 18% year on year, marking a second consecutive quarter of double-digit decline and pointing to weaker contractor order books in the months ahead.

Arcadis says the slowdown is broad-based, with all major sectors affected. Orders fell particularly sharply in commercial and public non-residential work, while housing remains weak despite some signs that demand is stabilising.

The report says construction is being held back by a combination of subdued underlying demand, delayed decision-making, slower approvals and weaker investor confidence, against a backdrop of continued uncertainty linked to the Gulf conflict.

Cost pressures are also beginning to rebuild. Materials inflation for all work reached 6% year on year in June, the highest level since March 2023. Energy markets remain volatile, with European gas prices up 55% year on year in July and copper up 39%, adding further pressure to manufacturing input costs and increasing risk on fixed-price contracts. Diesel prices are also creating a particular concern for infrastructure delivery.

Arcadis has kept its tender price inflation forecasts unchanged for 2026 to 2028, because our projections already account for inflationary pressures. The report says rising labour and materials costs are being offset in the short term by low workload and sustained competitive pressure, although medium-term inflation risks remain, especially as major programmes begin to convert into site activity.

The market outlook remains uneven. Arcadis sees stronger medium-term prospects in network infrastructure and public social infrastructure, supported by progress on AMP8 investment and the New Hospital Programme. However, these areas are not yet generating enough activity to support a wider recovery in the public sector, while housing and some private development sectors continue to face severe viability pressure.

Simon Rawlinson, Head of Strategic Research and Insight at Arcadis, said:

“The UK economy has held up better than many expected, but construction is telling a very different story. Output is barely moving, orders have fallen sharply for two quarters in a row, and that points to a clear risk of a double dip in workload.

“At the same time, inflationary pressures are building again. Energy and commodity markets remain volatile, materials costs are rising, and clients and contractors are having to manage growing uncertainty in an already fragile market.

“There are pockets of opportunity, particularly in infrastructure and public investment, but they are still too limited to drive a broad recovery. For now, the hard data points to a market that remains under real pressure.”

Alongside its market analysis, the report examines the implications of the Burnham government’s reform agenda. Arcadis warns that rapid progress on devolution and restructuring of the state could distract from the delivery of existing capital programmes if implementation is not carefully managed. While the reforms could strengthen regional investment and supply chains over time, the transition may also create short-term disruption to decision-making, governance and procurement.

The report also explores the impact of the Future Buildings Standard, due to come into force in spring 2027. Arcadis says the changes will require earlier design decisions, closer coordination between fabric and building services, and a more front-loaded approach to procurement and delivery. While the standard should improve long-term operational performance, it is also expected to increase complexity, add capital cost and create further viability pressure for some schemes.

Key findings from the report include:

• UK GDP growth resilient despite energy price shock, rising 0.4% in Q2 after 0.6% rise in Q1
• Total new-build output up marginally in Q2, but remained 6% below the same period last year - construction’s slow recovery after the wet winter underlines the effect of weak underlying demand as well as the immediate impact of global uncertainty
• Total new-build orders fell by 11.9% quarter on quarter and 18.1% year on year - the Gulf conflict and other tensions may have contributed to a double dip in the pipeline, just as inflationary pressures on the supply chain increase
• Materials inflation for all work reached 6% year on year in June, the highest level since March 2023 - material cost inflation is becoming the main cost escalation driver as energy cost hikes pass through to selling prices
• Commodities – energy costs remain elevated, with European gas prices up 55% year on year in July - heightened volatility in price levels increases the risk on fixed price contracts
• Construction earnings growth remained weak at 0.3%, compared with 3.3% across the wider economy, indicating continued slack construction labour market
• Tender price inflation forecasts for 2026 to 2028 are unchanged, reflecting a balance between rising input costs and continued competitive pressure