Glenigan’s December 2025 Construction Review tells two different stories.
Project starts are down 29% year-on-year, main contract awards are down 26%, and detailed planning approvals are down 26%. Isolated pockets of activity mask a fundamentally depressed market.
One sector explains the disconnect.
Data Centers Are Masking Office Sector Collapse
The “office” sector shows strong growth in project starts. This isn’t about offices.
The UK data center market will hit over £10 billion in annual investments by 2029. The government announced major data center projects as part of its AI opportunities action plan.
Blackstone’s approved £10 billion hyperscale data center in Northumberland alone creates 1,200 construction jobs.
These aren’t traditional office buildings. They’re digital infrastructure projects classified as “office” in construction statistics. The category system is outdated.
Without data centers, the office sector isn’t recovering.
Minimum Wage Increases Are Freezing Investment in Labor-Intensive Sectors
Retail and hospitality construction have hit a wall.
The minimum wage for 18- to 20-year-olds rose to £10 per hour in 2025—a significant increase. The hospitality industry employs a large proportion of young workers, pushing employer costs up sharply.
A third of minimum wage jobs are in retail and hospitality.
Combined with unforeseen National Insurance Contributions changes in April 2025, this creates investment paralysis. Employers told the Low Pay Commission that while the minimum wage increase was planned, the NICs changes were unexpected and had a greater impact.
You can’t expand when your cost base jumps unpredictably. Retail and hospitality operators are holding back on new builds and refurbishments—projects that made sense six months ago no longer pencil out.
The £120 Billion Infrastructure Pledge Has No Clear Delivery Mechanism
The UK budget confirmed £120 billion in increased departmental capital spending through 2029-30—part of £725 billion for infrastructure over the next decade.
Nobody knows how the money flows.
The Budget didn’t deliver a return on PFI or PPP models. Investments must deliver equivalent returns to government gilts. This gap between pledge and delivery mechanism prevents private investors from committing capital.
Contractors can’t price bids when the financing structure remains unclear. Government capital spending can stimulate demand only if procurement pathways are transparent.
Planning Approvals Are Signaling Future Contraction
Planning permissions in 2024 hit the lowest level since 2014.
Project approvals are at historic lows. The rolling annual total continues to decline.
Planning approvals are a 12-18-month leading indicator. What gets approved today becomes construction activity tomorrow. The pipeline is dry.
Planning authorities lack resources, adding cost and delay to every project. Even if demand returns, the approval bottleneck will constrain the industry’s response.
Winners and Losers
The UK construction market is splitting based on government policy and structural economic shifts.
Data center and digital infrastructure projects are booming—they align with national AI and technology strategies. Community sectors benefit from prison developments. Civil engineering receives government counter-cyclical support.
Labor-intensive sectors face cost shocks that suppress private investment. Planning approval declines will constrain recovery regardless of current activity.
London and the South East lead, but new data center projects are shifting to the North, East of England, and Wales, where land is cheaper, and temperatures are cooler. Government infrastructure policy creates concentrated regional benefits while other areas struggle.
The 14% quarterly increase isn’t a recovery. It’s noise. Data centers and government infrastructure projects are masking systemic weakness across residential, retail, and hospitality construction.
Until planning approvals reverse and policy uncertainty resolves, expect fragmented activity, not broad-based growth. The pipeline metrics tell you everything you need to know—and right now, they’re flashing red.