The funding boost for infrastructure is likely to offset “more constrained transport activity” this year, the firm said in its Construction and Housebuilding Outlook 2026-2028 paper, published this morning (12 March).

The report revealed a return to construction output growth last year at 1.1 per cent following two years of decline.

This is lower than data released by the Office for National Statistics (ONS) last month, which recorded a jump in annual construction output of 1.8 per cent in 2025.

PwC predicted 1.7 per cent output growth this year, to be followed by 2.9 per cent in 2027 and 3.5 per cent in 2028.

Growth last year was spearheaded by the industrial sector, where construction output rose by a fifth to £11bn, according to the report.

This was due to “sustained investment in energy transition, defence and advanced manufacturing” as well as a continued focus on digital infrastructure, PwC said.

It added that “government‑backed and regulated investment is now structurally underpinning activity rather than simply supporting the sector’s margins”.

Infrastructure construction growth up to the end of 2028 will also be driven by “sustained investment” in the energy and water sectors.

“This is underpinned by record levels of regulated investment, including tens of billions of pounds committed to electricity networks and a £100bn‑plus multi‑year [AMP8] programme across the water sector,” PwC said in its analysis.

Major nuclear, electricity and water infrastructure projects “continue to anchor the forward pipeline”, it added, citing examples such as Hinkley Point C and Ofgem’s RIIO-3 framework.

The PwC report said that public non-residential construction output “significantly outperformed expectations” last year, with an 18 per cent increase.

This reflected stronger-than-anticipated delivery in health and education, it added, with momentum in each sector from the New Hospital Programme and the Department for Education’s £15.4bn CF25 framework.

PwC leader for industrials and services Cara Haffey welcomed the comeback, achieved “despite ongoing economic and delivery pressures”.

She added: “The pressure is still on, and the sector will have many fiscal constraints to deal with, but the emphasis on long‑term capital investment and industrial priorities has created a clearer direction of travel for the sector.”

PwC said work in the residential sector “stabilised” but its report highlighted affordability problems, planning delays, regulatory complexity and heightened build costs. The consultancy warned the pace of recovery in the housing sector will “remain measured”, particularly in the public sector.

Its director for industrials and services Sam Edwards said construction businesses that “prioritise disciplined project selection, early engagement on planning and operational readiness” will be best placed to grow over the next two years.

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