INTRODUCTION
Tentative recovery to managed volatility
Early 2026 saw sentiment steady as clarity on interest rates and market activity boosted cautious confidence. For many, the new year marked the first opportunity in a while to refocus on long-term delivery goals. However, Q2 2026 marks a shift from tentative recovery to managed volatility. The question is no longer whether confidence returns, but how projects can remain viable.
Projects remain finely balanced. The conflict in the Middle East, the Carbon Border Adjustment Mechanism (CBAM) and increased import duties have renewed cost pressures, and the uncertain financial outlook has delayed Bank Rate reductions which in turn have suppressed confidence despite early economic growth.
The challenge for construction is not to simply respond to isolated shocks but to navigate successive periods of volatility that have tested assumptions and reshaped risk appetites across the market.
Tighter development appraisals, coupled with capacity constraints and planning delays, have made viability a moving target. Against this backdrop, the question is not whether viability challenges will persist, but how they can be managed in a way that keeps projects moving forward. This requires creative and pragmatic thinking, a broad evidence base and close collaboration within project teams. These approaches do not eliminate uncertainty, but they do improve resilience.
At a glance
Annual construction GDP growth in 2025
Annual construction input cost growth in 2025
Bid price inflation (escalation) estimate for 2026
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