A sharp decline in private housing construction has raised fresh concerns about the strength of Britain’s housebuilding sector, the latest data from the Office of National Statistics (ONS) shows.
New figures show that construction output for private housing across Britain fell by 6.3% in the three months to January 2026, marking a significant setback for a sector already facing ongoing economic and market pressures.
The drop in housebuilding output will disappoint policymakers, but it will not surprise anyone working in the sector, according to Neil Leitch, managing director of development finance, Hampshire Trust Bank.
He said: “ 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.”
“Demand for new homes is not the issue,” he added. “The challenge is creating the conditions that allow developers to move from approval to start with confidence. Decisions delayed today, or schemes that no longer work commercially, will feed through into weaker housing output in the years ahead.”
Overall UK construction output is estimated to have declined by 2% in the three months to January 2026, marking the fourth consecutive quarterly fall in activity.
During the period, output in new work dropped by 3.2%, while repair and maintenance activity edged down by 0.4%.
On a monthly basis, construction output rose by an estimated 0.2 per cent in January after three straight monthly declines. The modest increase was driven entirely by a rebound in repair and maintenance work, which grew by 3.3%, while new work fell by 2%.
Simon Dekker, senior relationship director at Paragon Development Finance, said: “The construction output figures show a broadly flat market, with new housing still under pressure while infrastructure and public sector work bringing most of the demand.
“For the hundreds of SME developers we work with, the biggest hurdle remains an unpredictable and slow planning system. That’s why National Planning Policy Framework (NPPF) reforms proposed towards the end of last year were a welcome step forward.
“In our consultation response, we urged government to require councils to review and release underused public land to create a stronger pipeline of small and medium‑sized sites, and to streamline Permission in Principle so SMEs can secure early certainty without excessive upfront cost. These practical changes would materially reduce planning risk, restore confidence for lenders and improve viability for smaller developers.
“We hope the final NPPF incorporates these measures to help build momentum and a more reliable, proportionate system which enables smaller housebuilders to deliver high‑quality homes at scale.”