CONSTRUCTION output fell by 2% in the three months to January 2026, compared with the three months to October 2025, official data published today by the Office for National Statistics showed, with one expert declaring the Government’s 1.5m housebuilding target “dead in the water”.
Official data published this morning showed that, in January 2026, the UK economy delivered zero growth, following growth of 0.1% in December and 0.2% in November 2025.
Services showed no growth, production fell by 0.1%, and construction grew by 0.2% in January 2026. And this all before the impending energy crisis due to the war in the Middle East which is expected to push up inflation.
Meanwhile, in the three months to January 2026, compared with the three months to October 2025, GDP grew by 0.2%, following growth of 0.1% in the three months to December, and no growth in the three months to November 2025.
Liz McKeown, Director of Economic Statistics, ONS, said: “There was another large fall in the construction industry in the latest three months, with continued contraction in housebuilding.”
One of the largest negative contributions to growth at the subsector level in the three months to the end of January was real estate activities (down 0.2%), driven by falls in real estate activities on a fee or contract basis (down 7.1%).
Experts blamed the lack of property transactions caused by the Budget, its timing and the mixed messages that preceded the late November fiscal event.
Dead in the water
Rohit Kohli, Director at Romsey-based The Mortgage Stop commented: “The Government’s 1.5 million homes target was dead in the water almost from the moment it was announced, because there was never a credible delivery plan behind it.
“Since then, policy and budget decisions have only made things worse. Builders are facing higher employment costs, more regulation and weaker investor demand, especially as landlords and investors pull back.
“In that environment, many developers are more inclined to sit on land than build into uncertainty. So the drop in construction output and real estate activity should not surprise anyone. In effect, the government has produced exactly the slowdown its policies were always likely to trigger.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, was scathing of the target: “This government’s 1.5m housing target is as dead as the “Dead Parrot” in the 1969 Monty Python sketch. To hit 300,000 homes annually, we need a surge that today’s data flatly contradicts.
“With construction output down 2% and private housing starts cratering, the gap between political ambition and site-level reality is a Grand Canyon-sized chasm.”
Referring to the drop in real estate activities dragging on the GDP data, Redondo added: “The Autumn Budget was a clear chilling factor. The 7.1% slump in “fee or contract” activities highlights a wait-and-see paralysis among buyers and surveyors.
“While the Budget didn’t cause the structural slowdown, the tax uncertainty regarding property income and high-value surcharges effectively froze the pipeline.”
Fall in real estate activity
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, agreed: “Scheduling a late Budget, combined with the countless leaks of potential tax changes, made it difficult for home movers and first-time buyers to make their most important decisions, which is a driver of the fall in real estate activity. Instead, sitting on hands became an unwanted pastime.
“And when the Budget finally delivered nothing for home movers, it was too late for anyone to feel interested as the festive season had already started. Time and time again we are seeing poor decisions from our beleaguered government, and it’s time to take action before a recession takes hold of the UK.”
While he doesn’t believe the 1.5m target is “officially dead”, Martin Rayner, Director at Compton Financial Services, said it is “certainly on life support”.
Target revised or abandoned
He continued: “Each month of weak construction data makes the goal harder to achieve and, unless activity improves meaningfully, it may only be a matter of time before the target is quietly revised or abandoned.
“Uncertainty has also played a major role in slowing the property market. In the run-up to the Autumn Budget there was widespread speculation about potential changes such as mansion taxes or new taxes on gains from primary homes. That kind of policy ‘kite-flying’ can be very damaging to market confidence.
“When buyers and sellers believe the rules may change, many simply pause and wait. That hesitation slows transactions and ripples through the wider housing and construction sectors, which is exactly what we are now seeing in the data.”
Michelle Lawson, Director at Fareham-based Lawson Financial, a broker, described the Government’s target as “unrealistic, “unachievable” and “a guaranteed non-starter” given the soaring cost of materials and labour in the construction sector.
She continued: “Another problem is that developers charge top money for a house made of poor quality. It’s putting people off as they know that they are being charged a premium for a property that, at best, can be described as flimsy.”
Photo by Mathew MacQuarrie on Unsplash
