Employment in London’s construction industry has fallen sharply over the past year, the latest data shows, as stalled housing schemes, tighter finance, and a slowdown in infrastructure spending combine to squeeze the sector’s capacity. Industry leaders are warning that the capital risks a loss of skills and labour that could take years to rebuild — even as government and business both insist that faster housing delivery remains a national priority.
According to the Office for National Statistics (ONS), the UK’s construction workforce fell to 2.28 million people in mid-2025, down about 90,000 workers from a year earlier. London has seen some of the steepest declines, with the number of people employed in the capital’s construction sector dropping by roughly 8 per cent year-on-year, a sharper fall than in any other English region.
The contraction reflects a wider slowdown in building activity. The Construction Purchasing Managers’ Index (PMI) has registered contraction for most of 2025, and housing starts in London are at their lowest since 2009. Developers and contractors have cut back on labour to preserve cash as project pipelines thin, particularly in residential construction. A number of large schemes — including major regeneration sites in Barking, Wembley, and Nine Elms — have paused or delayed phases amid planning revisions and financing pressures.
Rising costs and uncertain workloads have made matters worse. Labour inflation, which surged by nearly 30 per cent between 2021 and 2023, has now levelled off but remains high by historical standards. Employers are reluctant to hire or train new entrants until they have firmer visibility on projects for 2026 and beyond. The result is an uneasy mix of underemployment in some trades and chronic shortages in others — especially electricians, cladders, façade engineers, and building-safety specialists required under the post-Grenfell regulatory regime.
The Capital’s dependence on overseas labour has also left it vulnerable. ONS migration data and Construction Industry Training Board (CITB) analysis suggest that around 55,000 EU workers left London’s construction sector between 2019 and 2024, driven by Brexit, Covid, and tighter visa conditions. While recent visa reforms have added key trades to the Shortage Occupation List — including bricklayers, roofers, and plasterers — industry groups say the administrative costs and salary thresholds continue to deter smaller firms from recruiting abroad.
The consequences are visible across the supply chain. Subcontractors report that some tenders now attract half the number of bids seen before the pandemic, and larger contractors warn that a lack of skilled labour is slowing delivery on active sites. The CITB’s annual forecast estimates that the UK will need an additional 251,000 construction workers by 2028 to meet demand — with London alone requiring about 26,000 of those if housing, retrofit, and infrastructure targets are to be met.
For now, the market is fragile but not collapsing. Employment remains well above the pandemic low, and public-sector work — from school rebuilding and hospital refurbishments to rail upgrades — is providing a limited cushion. However, many private contractors warn of a skills “cliff edge” if output continues to stagnate. The longer projects are delayed, the more skilled tradespeople drift into other industries, from logistics to energy and maintenance, where wages and job security are improving.
Policy responses have been piecemeal. The government’s 2025 Construction Sector Deal refresh pledged to expand technical apprenticeships and reform the Apprenticeship Levy to make on-the-job training easier for small firms. The Mayor of London has also relaunched his Construction Academy Scheme, providing grants to training hubs in Enfield, Barking, and Southwark to tackle local shortages. But training providers say funding and coordination still lag far behind demand.
Looking ahead, much depends on whether stalled housing and infrastructure projects restart in 2026. Falling interest rates could help, as could planned reforms to environmental permits and building-control processes that have slowed early-stage work. Analysts expect some rebound in employment next year if planning approvals pick up and government capital programmes — particularly net-zero retrofits and transport upgrades — move ahead.
Still, the message from the data is clear: London’s construction workforce is contracting at the same time as the city needs to build more homes, retrofit older stock, and deliver greener infrastructure. Unless the industry can stabilise its project pipeline and rebuild skills training, the capital risks entering the next upturn without enough hands to build it.