Is the construction industry recovering? September 2026 output and what it means for funding

Construction output grew by 0.8% in September 2026 after four monthly falls in a row, the Office for National Statistics reported on 12 November. But the quarter as a whole was weaker, with output down 0.7% between July and September and private housebuilding down 4.7%. For builders, contractors and trades the question is a practical one. Is construction recovering, or is one good month hiding a tough winter? Here is what the figures show, where the pressure is and how firms are funding the gap between doing the work and getting paid. Smart Funding Solutions is a broker, not a lender. We search the market and arrange business finance from £10,000 to £20 million.

01Is the construction industry recovering?

Not yet, on the official figures. September was the first monthly rise after four falls, which is welcome, but one month does not make a recovery. The ONS figures for the third quarter of 2026 show the wider picture.

• September. Monthly output up 0.8%.
• July to September. Total output down 0.7% on the quarter before.
• New work. Down 1.6% in the quarter, while repair and maintenance grew by 0.5%.
• Private new housing. Down 4.7%, the biggest drag on the quarter.
• New orders. Up 1.2%, or £107 million, in the quarter.
• Prices. Construction output prices rose 3.2% in the 12 months to September.

The rise in new orders is the most hopeful number, because orders today are the work of the next year. Our report on the September construction PMI tells a similar story from the survey side.

02Why is housebuilding falling?

Private new housing fell 4.7% in the quarter. Buyers face higher mortgage rates since the Bank of England raised Bank Rate to 4% on 5 November 2026, and builders face costs that are still climbing, with output prices up 3.2% in a year. When sales slow, small housebuilders hold back from starting the next site, and that hits the groundworkers, roofers, scaffolders and electricians who follow them.

If you build homes yourself, our page on property development finance explains how lenders fund a scheme, and the development finance calculator gives a first idea of the numbers.

03Which construction businesses feel the squeeze most?

Repair and maintenance grew while new work fell, so the mix of your work matters. Firms that depend on new homes or new commercial schemes feel it most.

• Subcontractors on housing sites. See construction finance.
• Scaffolders and roofers paid in stages. See scaffolding loans and roofing business finance.
• Electricians, plumbers and heating engineers moving to repair and maintenance work. See electrical contractor finance and plumbing and heating finance.
• Groundworkers and utility contractors. See utility contractor finance and our guide to civil engineering funding.
• Builders merchants carrying stock and credit for the trade. See builders merchant finance.

04How do contractors fund the gap between valuation and payment?

In construction you pay for labour, materials and plant first and get paid weeks later, often less a retention. Three things stretch that gap.

• Payment terms. GOV.UK says an agreed payment date must usually be within 60 days for business transactions, and longer terms must be fair to both sides. Our guide to chasing late payment sets out your rights.
• CIS deductions. Under the Construction Industry Scheme, a contractor deducts 20% from a registered subcontractor's payments, or 30% if the subcontractor is not registered, and passes it to HMRC.
• Stage payments. Work is valued and paid in stages, so a disputed valuation can hold up a large sum.

Finance built for this includes construction invoice finance, which funds applications for payment, and contract funding, which pays for the start of a new job. Selective invoice finance funds a single invoice, as in our subcontractor case study. See how much invoice finance costs or try the invoice finance calculator.

05Can a builder borrow to pay wages, suppliers or tax?

Yes. Working capital loans and a revolving credit facility cover a shortfall between stage payments, and our page on a business loan to pay wages covers payroll. Trade finance pays suppliers for materials up front.

For tax, GOV.UK says you may be able to set up a payment plan if you cannot pay in full, and HMRC will check whether it is affordable. Some firms prefer to pay on time with a short loan instead. Compare the two in Time to Pay vs a tax loan, and see corporation tax loans and VAT loans. Our construction corporation tax case study shows how one firm did it.

06Should I finance new plant and vans now or wait?

If the work is booked, waiting rarely helps. Prices are still rising, and hire costs add up. Plant and machinery finance and tipper truck finance spread the cost over the working life of the kit. Our guides to construction equipment finance and excavator finance compare the options.

If you already own your plant, asset refinancing or sale and leaseback can release cash from it without selling.

07Are more construction firms going bust?

Construction had more company insolvencies than any other industry in England and Wales over the 12 months to September 2026, the Insolvency Service reports, with 3,873 cases or 17% of those with an industry recorded. Our report on company insolvencies in September 2026 has the detail. When a main contractor fails, its subcontractors are often left unpaid, so check who you are working for and keep an eye on how quickly they pay. Our report on the Commercial Payments Bill explains the planned new rules on payment terms.

08What does it mean for your funding?

One good month and a rise in new orders are a start, but the quarter was weaker, housing is falling and costs are still rising. That is the mix in which cash runs short even for busy firms. Lenders will look at your order book, your debtors and how quickly your customers pay, so have your applications for payment and aged debt list ready. The construction trades funding case study shows the kind of deal we arrange. Fees depend on the lender.

Use Instant Quotes to see which lenders could fit your construction business in minutes, with no credit check, or talk to a broker about funding your next contract.