Total construction output is estimated to have fallen by 2% in the three months to January 2026, the fourth consecutive fall in the three-monthly series, according to ONS figures.

Neil Leitch, Managing Director of Development Finance, Hampshire Trust Bank, said: “A fall in housebuilding output will disappoint policymakers, but it will not surprise anyone working in the sector. Developers have been operating in very challenging conditions and the industry is still struggling to regain momentum. 

“The deeper issue is viability. Planning delays remain a major constraint, but the pressure is broader than that. Policy costs have increased, inflation uncertainty has returned and funding conditions are less predictable than many expected coming into the year. At the same time, land expectations have not always adjusted to reflect tighter margins, leaving schemes with far less flexibility to absorb additional cost pressure or programme delays once delivery begins. Wider geopolitical instability, particularly the recent volatility in energy markets linked to tensions in the Middle East, is another reminder of how quickly input costs can shift and why margins across the sector remain under pressure. 

“For SME developers in particular, those pressures can quickly become decisive. Delays and cost uncertainty affect cash flow, site turnover and the ability to recycle capital into future projects, meaning delivery capacity can quietly drop out of the market.”