Investing in technology: the key to unlocking UK construction productivity

By historical standards, the UK construction sector has experienced something of a productivity resurgence over the past five years. Official data, which measures productivity as output per hour worked, shows that construction has outperformed the wider economy by a considerable margin.

Between Q4 2019 and Q2 2025, productivity in construction increased by 7.7%, compared with just 1.3% across the economy. Yet the longer view paints a more muted picture. From Q1 1997 to Q2 2025, construction productivity grew by only 8.4% in total, equivalent to a modest 0.1% per year. Over the same period, manufacturing managed on average annual productivity growth of 0.9%.

The sector’s recent gains have been driven, in part, by a shrinking workforce. 

Construction employment has fallen by 10.5% since early 2019, and total hours worked are down 6.7%. With output rising despite fewer human inputs, the industry has worked more productively, achieving more with less.

This uptick follows two decades of stagnation and decline. In the 20 years leading up to the Covid-19 pandemic, output per hour in construction fell by 2.4%. The recent improvement therefore represents a meaningful shift, though not yet a transformation.

Construction has long been a slow adopter of technologies that would significantly lift performance. A clear route forward is the wider use of modern methods of construction (MMC). 

Greater standardisation of design and increased product modularisation, with more components manufactured in controlled factory environments, can shorten delivery times and reduce costs through economies of scale. MMC also enhances reliability and precision, improving overall quality and consistency.

However, accelerating MMC adoption across the industry remains a complex challenge. Scaling up requires substantial capital investment in manufacturing facilities, as well as new skills, supply chain alignment and confidence in long-term demand.

Labour shortages are also constraining productivity. The reduced workforce has contributed to delays, quality issues, rising costs and pressure on margins. The combined effects of Brexit and Covid-19 have exacerbated these shortages, with many experienced workers exiting the industry and proving difficult to replace. 

According to the Construction Industry Training Board, the sector will need to recruit around 239,300 additional workers between 2025-29. As Figure 2 shows, the greatest demand is expected in “other construction and building trades”, including cavity wall insulation, demolition and refurbishment, all roles essential to meeting future workload requirements.

The government has sought to support the industry by announcing, last year, a £625m training package aimed at expanding the pipeline of skilled workers. The plan includes training up to 60,000 additional construction workers by 2029, establishing 10 new building colleges and funding more than 40,000 industry placements each year. While this falls short of the estimated requirement, it nonetheless represents a step in the right direction.

Long-term visibility over project financing is equally important. The £750bn commitment in the 10-Year Infrastructure Strategy provides much needed clarity on future investment pipelines, giving the supply chain greater confidence to invest in capacity, skills and innovation.

With a diminished workforce, the onus is on firms to invest more in digital and artificial intelligence technologies to raise productivity.

Work has already been delivered on design, safety and new materials. Now there must be a shift to improve on current processes, such as digital documentation and building information modelling to enhance efficiency and greater productivity. Innovations in modularisation can be potentially significant, especially when produced to scale.

Getting this right will deliver benefits not only for the industry, but for the wider economy over the long-term.

Nitesh Patel is a lead economist at Turner & Townsend.