The Federation of Master Builders (FMB) says small builders' worst fears have been confirmed, with new forecasts predicting the construction sector will shrink 2.5% as the Iran war drives up costs and dampens demand.
The Construction Products Association (CPA)'s spring forecast, published yesterday, warns that overall construction activity will fall 2.5% in 2026 – with the private housing repair, maintenance and improvement (RM&I) sector facing the steepest decline.
The new industry forecasts are also predicting an 8% fall in repair and maintenance work this year. It comes as the FMB and HomeOwners Alliances' recent research found the economy has missed out on £11.2bn as one in five homeowners are put off doing domestic building work.
Brian Berry, Chief Executive of the Federation of Master Builders, said:
"Since the situation in Iran our members have been sharing their concerns about the impact on material costs and oil prices - combined with the threat of work potentially drying up. This CPA forecast of an 8% fall in repair and maintenance work will hit small, local firms like our members the hardest. Economic turbulence makes consumer protection more important than ever. Furthermore, our research proves homeowners are being put off doing building work due to a lack of trust in the industry, a mandatory licensing system would give homeowners confidence to hire trustworthy and legitimate builders - which is what the sector desperately needs right now"
Paula Higgins, CEO of the HomeOwners Alliance added: "When confidence in the economy drops and prices continue to rise, homeowners pause spending. The government can help counter that by restoring trust and making it easier to find reliable builders through licensing. That would be good for the economy, support the construction sector and help homeowners maintain safe, comfortable homes, knowing they won’t be ripped off by rogue traders."
The CPA downgraded its forecast sharply from winter predictions, pointing to rising oil and energy costs from the Iran conflict as the primary driver. The trade body warned of "sharp cost increases" in the second half of 2026 and falling confidence among homeowners.
The CPA's outlook echoes concern across the industry, with separate research showing nearly seven in ten UK construction companies fear "severe" impacts from the Middle East conflict over the next six months.
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