THE CONSTRUCTION sector in Wales is entering 2026 with cautious optimism, supported by continued public sector investment and a pipeline of major infrastructure and energy projects, according to a new report.
Analysis by Rider Levett Bucknall suggests that long-term commitments to energy transition, digital infrastructure and transport upgrades are helping to stabilise the market, despite ongoing global uncertainty.
Major projects highlighted in the report include the proposed Wylfa small modular reactor, the green industrial transition at Port Talbot, and the development of AI Growth Zones. These schemes are expected to create significant opportunities for contractors across Wales, particularly in infrastructure and energy resilience.
However, the report warns that short-term challenges remain. Global pressures, including instability in the Middle East, continue to create uncertainty, while longstanding domestic issues such as planning delays are still affecting progress.
Daniel Walker, an associate at the consultancy based in Cardiff, said that while activity levels remain steady, structural barriers are slowing delivery.
He said: “Across Wales, on-site construction activity remains steady, with visible progress across major centres including Cardiff, Swansea and several valley towns. However, structural challenges remain. Planning delays, particularly those linked to sustainable drainage system approvals, continue to slow early-stage progress on both private and public sector schemes.
“Despite this, and wider geopolitical uncertainty, the market has seen a slight increase in project starts over the past quarter.”
Public sector spending continues to underpin much of the activity. The report notes that devolved fiscal powers have unlocked an additional £505 million for infrastructure and local development, supporting projects in education, healthcare and transport.
Wales is also emerging as a growing hub for digital and energy infrastructure. Investment in data centres is ongoing, while preparatory work linked to Wylfa and the decarbonisation of steel production at Port Talbot is expected to drive demand for construction in the coming years.
Infrastructure remains one of the strongest-performing sectors, supported by transport upgrades and early work associated with the proposed Crossrail Cymru programme. Industrial and energy-related construction is also expanding as Wales accelerates its shift towards low-carbon industries.
In contrast, the high-end residential market has softened, although affordable housing and build-to-rent developments continue to perform more strongly.
The consultancy is currently involved in the Cowbridge Road East scheme in Cardiff, a project aimed at delivering affordable and sustainable housing. It said work is ongoing to ensure the scheme remains viable while helping meet demand for new homes.
The report concludes that, despite ongoing challenges, the combination of public investment, energy transition projects and digital growth places the Welsh construction sector on a broadly positive footing for 2026 and beyond.
Tender price inflation is forecast to remain stable, with a projected rate of 3.4% in Wales for 2026, slightly below the UK average of 3.45%.
