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The Scottish Construction Industry – Challenges and Opportunities in 2026

June 2026

Construction output in Scotland in 2026 is projected to be in the region of nearly £17.5 billion. This estimate output is primarily comprised of:

• new housing, being c. £2.5 billion (15%);
• infrastructure projects, being c. £4.75 billion (27%); and
• repair and maintenance work, being c. £6.75 billion (39%).

The industry has seen little meaningful growth in recent years, sitting at as little as 2% each year. This reflects the widely known fact that the construction industry is typically a good barometer of the wider economy.

Infrastructure Investment Framework

In January 2026, the Scottish Government published its draft 10 year framework for the delivery of crucial public infrastructure projects in Scotland. In this draft report, the Scottish Government renewed its commitment to maximising the use of existing assets, reconfiguring and repurposing facilities when appropriate, and building sustainability to meet future needs. It also noted that, despite 2.4% of GDP being spent on public infrastructure in 2023 to 2024, capital projects were experiencing significant challenges due to:

• the 30% rise in construction costs in the post-pandemic period;
• supply chain disruption; and
• workforce shortages.

The report also acknowledged that further pressure would be placed on existing infrastructure due to the impact of climate change and the increased demand for public services as a result of Scotland’s aging population.

The public consultation regarding the fundamental principles to be applied when investing in and prioritising between infrastructure projects concluded on 5 May 2026. The feedback received is to be incorporated regarding the final version of the ten-year framework, which will be published later this year.

Infrastructure Delivery Pipeline

In January 2026 the Scottish Government also published its Infrastructure Delivery Pipeline setting out its plans to invest over £11 billion on key infrastructure projects and programmes in the next four years. This pipeline includes the investment of:

• £4.1 billion to support the delivery of 36,000 affordable homes;
• £1.2 billion to renew Scotland’s rail fleet and ferries;
• £700 million to fund the construction of two new prisons, HMP Glasgow and HMP Highland; and
• significant further investment in the ongoing dualling of the A9 between Perth and Inverness.

The investment in the A9 dualling is already underway with the Scottish Government commencing the procurement process in respect of the appointment of framework contractors to design and construct five sections totalling more than 90 km. It is estimated that the total value of these contracts will be nearly £1.94 billion.

The National Housing Emergency

In May 2024, the Scottish Government declared that there was a national housing emergency in Scotland. The homelessness charity, Shelter Scotland, reports that in 2025 a household became homeless in Scotland every 15 minutes and that 39 children in Scotland become homeless every day.  In January 2026, the Scottish Government announced its intention to launch a new housing agency next year named ‘More Homes Scotland’.

The then Cabinet Secretary for Housing, Màiri McAllan, stated that this new agency will address the crisis by bringing “simplicity, speed and scale to the delivery of housing that Scotland needs”. In particular, it is intended that this agency will:

“ – make greater use of land assembly and preparation powers to support viability and help accelerate pace of delivery;

– provide enhanced support on housing planning and development delivery;

– Introduce greater opportunities for standardisation and adopt simplified commissioning options; and

– promote flexible funding approaches to drive economic growth opportunities, including through joint work with SNIB.”.

It remains to be seen if and how the plans for the new national agency will progress following the SNP retaining its position as the largest party in the Scottish Parliament, and the appointment of Shirley-Anne Somerville as Cabinet Secretary for Social Justice and Housing.

Cladding Remediation

The Cladding Remediation Programme allows homeowners to apply for government funding to assess fire safety risks associated with external wall systems and to carry out any remedial works needed to eliminate or reduce those risks.

In the latest update published by the Scottish Government it was reported that:

• it had received 1,762 applications in relation to the Cladding Remediation Programme;
• more than 45% of those applications did not meet the criteria for government funding;
• urgent interim measures to address an immediate risk to life had been put in place for 10 buildings;
• remediation works were underway in three buildings; and
• the programme has cost £17.1 million since the financial year 2021/22.

In March 2026, the Scottish parliament passed the Building Safety Levy (Scotland) Act. This new legislation seeks to ensure that the financial burden of the cladding remediation programme will be met by the construction industry rather than the taxpayer – placing additional financial pressure on a sector already under strain.

There was considerable opposition to the new levy, with the Finance and Public Administration Committee raising concerns about its potential impact on the housebuilding sector amid the ongoing housing emergency.

The Building Safety Levy will apply to construction and conversion works which complete after 1 April 2028. It is anticipated that indicative rates for the levy will be published later this month.

Hospitals Inquiry

The public inquiry regarding the design, construction, and maintenance of the Queen Elizabeth University Hospital in Glasgow and the Royal Hospital for Children and Young People and Department of Clinical Neurosciences in Edinburgh has been ongoing since August 2020.

While the final report from the Hospitals Inquiry will not be published until later this year, there has already been significant public and media interest in the closing statements issued by the participants, particularly NHS Greater Glasgow and Clyde’s acceptance that it was “more likely than not” that the fatal infections were caused by defects in the water system.

Whilst those involved in the Inquiry will be seeking clarity regarding on the cause of the infection outbreak, and the steps that could have been taken to prevent or mitigate it, there is also likely to be continued public debate about the time and cost of the inquiry process, noting that, in December 2025, it was reported that the Hospitals Inquiry had cost more than £31 million, with over half spent on Inquiry staff.

The ageing workforce

The CITB has warned that “losing aging workers will lead to an increasing loss of valuable expertise” and the Scottish construction industry needs “over 17,950 extra workers over the next five years” to replace lost workers.

It is hoped that in the new parliamentary term the Scottish Ministers will use the powers provided in the Tertiary Education and Training (Funding and Governance) (Scotland) Act to help address the shortage of suitably qualified workers in the construction industry. This Act, which was passed in January 2026, allows Scottish Ministers to provide grants for apprenticeships and other work-based learning programmes.

Data centres

While Scotland’s Data Centre market is currently significantly less developed than in England and Ireland, there can be little doubt that it will become a key growth area for the construction industry in the coming years with plans submitted for 17 new data centres across Scotland.

However, those plans are likely to face significant opposition and delay due to concerns regarding the energy requirements for Data Centres (and the subsequent constraint on the available electrical supply) as well as the need to consider the environmental implications of such developments. One such example of public opposition can be seen in relation to the proposal to construct three two-storey data centres between the rural villages of Longformacus and Westruther in the Scottish Borders. Whilst the developers hope that this £2 billion investment will bring 145 long-term jobs and contribute £12 million per year to the local economy, local campaigners from the  “Save the Lammermuirs – Stop the Data Centre” action group state that the 24 metre high data centres will “be a monster, consuming vast resources of electricity, and draining the life and beauty from the landscape”.

The construction of these Data Centres in Scotland would create further demands for skilled construction workers which, as noted above, may prove challenging given the high numbers of workers in key trades retiring, becoming unemployed, or leaving the profession.

Summary

The significant planned investment in new homes and infrastructure presents major opportunities for the Scottish construction industry to grow. However, to fully capitalise on these opportunities, the industry must navigate a challenging economic environment, attract and train a new generation of skilled workers, and manage public scrutiny around ongoing cladding remediation works, the long-awaited outcome of the Hospitals Inquiry, and concerns about the environmental impact of new developments.

Beale & Co’s specialist team in Glasgow support contractors to navigate the new challenges facing the construction industry by providing clear and commercial advice at every stage of a project. If you have any questions regarding the developments discussed above, please contact Kate Ross and Fraser Hopkins.

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