The latest analysis from specialist property finance provider, West One Loans, has found that the UK’s construction sector is forecast to grow by 2.5% in 2025, marking the first annual increase in two years and signalling the start of a long-awaited market revival.

This recovery follows a period of contraction that saw the value of the sector shrink by 7.2% since 2023.

The rebound is being driven largely by building development activity, particularly new housing schemes and commercial projects, with residential development rising by 10.0% over the past year and commercial construction climbing 13.9%.

The growth highlights the resilience of the market and its ability to adapt despite significant headwinds, from high interest rates to ongoing planning delays. Demand for both homes and modern commercial premises remains strong, and developers are moving ahead with projects to help meet that need.

Specialist lenders have played a vital role in enabling this progress, offering flexibility and certainty at a time when traditional funding routes have been more cautious. With the ability to provide tailored solutions at speed, specialist finance has become an essential tool for developers looking to deliver viable schemes in a challenging environment.

The return to growth also offers a broader boost for the economy, with development activity creating new housing supply, driving investment into commercial hubs, and supporting employment across the construction sector and wider supply chain.

Co-Head of Short-Term Finance at West One Loans, Thomas Cantor, commented:

“After two consecutive years of decline, the return to growth for the UK construction sector in 2025 is an encouraging sign, but one that hasn’t come easily. Developers are still contending with high interest rates, planning delays and a tighter regulatory environment, whilst traditional funding routes remain selective.

Specialist finance is playing a critical role in helping developers move forward with viable projects by offering tailored funding solutions with speed and certainty. It’s clear from the data that lending to residential and commercial development has been instrumental in reviving the sector, and this momentum is likely to continue as demand for housing and commercial infrastructure investment remains strong.”

Data Tables and Sources