Construction in 2026 - A land of opportunity?

Construction

Apart from trying to meet its ambition of 1.5m new homes this parliament, the government is investing in and/or promoting construction in many sectors.

For example, the extension of the DLR to Thamesmead is intended to unlock 25,000 new homes, National Infrastructure Projects from clean energy to a third runway for Heathrow, all the work required to construct new towns, data centres and so on and the proposed new PPP (Public Private Partnership) for healthcare provision, should give a huge boost to the construction industry over the years ahead. 

Planning processes

A new AI system, called Extract, is to be rolled out to all councils. It will enable council officers to digitise planning records, including plans, in only minutes per document, compared with the two or three hours it would take a human. Extract should take a big chunk out of the estimated 250,000 hours currently spent annually by planning officers on this task.

The planning process will be streamlined, including by requiring that more planning applications are dealt with by planning officers, rather than council committee members.

The process for determining nationally significant infrastructure projects will be simplified.

In terms of applications made, the news is good. Planning applications for 335,000 homes outside London were submitted in 2025, according to Planning Portal. That’s up 60% on 2024. 

Building out existing planning permissions

Last year the government consulted on a potential statutory build out framework and this year it hopes to implement it. It might require a build out programme to be submitted with residential planning applications and for updates on progress after the grant of planning. It may also give planning authorities the right to refuse to determine a new planning application where the developer applicant fails to build out, at a reasonable rate, an already consented scheme.  

The Budget

The Budget promised funding for 350 more planning officers around the country.

In addition, seven Mayoral Strategic Authorities will receive £13bn to prioritise growth in their regions and eleven of them will receive a share of £902m to invest in local infrastructure, business and employment support and skills programmes, through the Local Growth Fund. 

Grey Belt land

We can expect to see more developers trying to take advantage of the government’s green belt guidance, which is intended to enable development of lower quality green belt land providing it doesn’t undermine the wider green belt. 

National Planning Policy Framework – possible relaxations

The government is consulting on plans to exempt developments of no more than 9 dwellings from the 10% biodiversity net gain (BNG) requirement and to reduce or simplify the BNG requirements for schemes of 10 – 49 homes. These proposals have led to opposition from nature bodies but also from academics, business leaders and others who fear long-term damage from short-term acceleration of the development process – not just to the environment and placemaking but also to the burgeoning nature investment market.

The government is considering exempting developments of 10 – 49 houses from the Building Safety Levy, when it comes into force.

The government is also thinking of granting a default “yes” to planning applications for housing on land around “well-connected” railway stations, if they meet certain rules, including minimum housing densities. 

Any problems?!

Of course, all these proposals will take time to produce results, even in the best of circumstances.

A major issue is the capacity of the construction industry. In 2024, the Construction Industry Training Board estimated that an additional 251,500 construction workers would be needed to meet expected demand by 2028. How many more might now be required after some or all of the boosting referred to above?

Where will the skilled workforce be found? It’s a workforce that will have to embrace AI, BIM, modern methods of construction (MMC) and so on, while still retaining and expanding expertise in more traditional skills. All this at a time when the sector’s baby boomers are retiring in large numbers and we can no longer rely on a ready supply of foreign construction workers.

Clearly, some of the Budget’s £902m for local infrastructure, business and employment and skills programmes will help train up a new generation of skilled construction workers but it will take time. The industry itself will have to devote huge resources to this problem, which will include how to make construction a more attractive career, for example, to women.

The other worry is demand. The number of Energy Performance Certificates issued in 2025 was a little lower than in 2024. Even in the affordable housing sector, there has been a recent drop off in demand from Registered Providers/housing associations, so that thousands of built or consented affordable homes now have no buyer. That can also delay build out of the private elements of a site and badly affect developers’ cash flow and profitability.

Modern methods of construction

Perhaps the government will try to mandate off-site and 3D construction or at least do its best to promote it, particularly where schemes lend themselves to a level of mass production. Will the sector, in practice, have no choice but to adopt it and lenders to fund it to meet the huge impending demands for infrastructure and new buildings? So far, things have not been easy for MMC. 

Interesting times

2026 should be anything but dull for development and construction. Those willing and able to invest in people, all that AI has to offer and, where appropriate, MMC, should be well-placed to take advantage of the opportunities the government is working to create – but only if the demand is there for the end  product. If the government imposes build out timetables on consented housing schemes, developers could find themselves competing developments for which there is inadequate demand. In those circumstances, perhaps we could then see a reduction in planning applications. 

Please contact Andrew Harborne on 020 8776 3883, or any member or our Construction team for legal advice on any of the issues we have outlined above.