THE continued rise of Artificial Intelligence, addressing skills shortages, and meeting demand for housing and electrification have been identified as some of the key trends and challenges which look set to shape Scotland’s construction industry in 2026.
As is now tradition in January, Project Scotland has taken a look at the year ahead by soliciting the views of a wide number of stakeholders from across the construction and built environment sectors, asking them what they reckon lies in store over the next 12 months.
With the Scottish Parliamentary elections scheduled for May, 2026 seems set to be a particularly important year for an industry crying out for clarity and stability.
Ian Hughes, engagement director, Scotland, CITB, said it’s crucial that the construction sector’s skills gap is addressed in 2026.
“Scotland’s construction industry has experienced a mixed year during 2025 – output has increased overall, although some sectors are doing better than others. We expect output to grow by an annual average of 2% between 2025 to 2029. Looking ahead to 2026, there have been some key policy announcements, including the government’s commitment to delivering 36,000 affordable homes. The proposed Scotland tertiary education and training (funding and governance) Bill promises a more flexible, transparent skills system, empowering employers in training decisions and supporting multiple routes to competence.
“It’s crucial the skills gap is addressed to support business growth and the government’s ambitions. Many firms struggle to recruit skilled tradespeople, and we recommend greater investment in the construction skills and training system as an opportunity for economic growth and social mobility. Skills shortages and an ageing workforce risk project delays and increased costs. Opportunities are abundant in infrastructure and housing, but success hinges on industry-wide commitment to training that leads to jobs.”
Paul Mitchell, MD at the Scottish Building Federation (SBF), said that what the industry needs is a stable landscape with certainty over investment and regulation that allows for long-term planning.
“With our usual optimistic outlook, we look forward to seeing how the recently introduced Planning Hub address delays in the time to process planning applications. We’re also looking forward to the £4.9 billion pledged to build 36,000 affordable homes by 2030 being formally approved at the forthcoming Scottish budget.
“With slightly more trepidation, the Scottish Building Safety Levy is on the horizon from 2028 so we’d hope after the election to see more detail on indicative rates, to give us more time to prepare for the practical impact that the introduction of the levy will bring. With a 2026 election looming, this is a genuine opportunity for greater political engagement with the Scottish Government to identify solutions to increasingly urgent challenges.”
Mandy Watson, project management partner at Ryden, said the business is seeing major opportunities emerging across renewable energy, data centres and defence, driven by strong investment commitments from the Scottish Government which will progress in 2026.
“While Ireland’s data centre market is already mature, Scotland is now entering a pivotal new phase, with large-scale proposals emerging across the central belt and the Highlands, where land availability and strong grid connectivity create ideal conditions for growth.
“Defence will also be a sector to watch, as substantial funding is expected to accelerate project delivery at pace. The ongoing shortage of Grade A office space continues to push refurbishment activity, a trend that will only increase as owners look to upgrade and repurpose existing stock.
“Looking ahead, Green Freeport development will sharpen the focus on infrastructure and housing, particularly in the Highlands, where demand for accommodation for key workers for supporting these next-generation renewable energy projects is already rising.”
Barry O’Hagan, regional director – Scotland at Tilbury Douglas, said he’s excited about what’s coming up next for the business north of the border. “We’ve got several major frameworks up for renewal, and for me, that’s an opportunity to reinforce the partnerships we’ve built and to show the value we bring through steady, reliable delivery. These frameworks have shaped much of our recent success, and I’m confident they’ll continue to play a big part in our future.
“We’re looking forward to building on our existing education and healthcare portfolio with some recent wins that will align with our wider business’ core sectors. These are the kinds of projects that really matter to our team, as they create better places for those within our communities.
“The Scottish Parliamentary election in May will set the tone for public investment, but whatever direction things take, our focus remains the same: being a dependable partner and delivering projects we’re proud of.”
Robert Dawson, Groundforce regional sales manager Scotland, believes the nation’s construction sector will be shaped by three major forces in 2026: decarbonisation, electrification, and digital innovation.
“These trends will create clear opportunities for improved efficiency and lower-carbon delivery, but they also intensify existing challenges, particularly the skills shortage, planning delays and increased environmental and safety obligations.
“A key opportunity lies in the industry’s accelerating adoption of digital tools, which can support faster design decisions, better safety outcomes and more consistent standards. Groundforce has already seen how tools like YourSolution and YourSolution+ are helping teams, especially new entrants, understand temporary works more easily and achieve safer excavation planning.
“Decarbonisation will also remain a major focus. Providing embodied-carbon estimates for temporary works and expanding access to electric pump technologies are examples of how the sector can transition away from fossil fuels. The companies that embrace these shifts early will be best placed to support Scotland’s infrastructure needs.”
Angela Rowley, head of property and development for Clyde Gateway, said the built environment enters 2026 amid investor hesitancy, tighter funding, and caution across construction – pressures that risk slowing regeneration and low-carbon growth when Scotland needs them most. Despite this, Clyde Gateway remains optimistic.
“Our £500 million Innovation masterplan is moving from vision to delivery, marking a step-change for the area. With two units at Innovation Shawfield complete and CCG Homes onsite, 2026 will see XWorks commence, followed by Red Tree Labs, creating an ecosystem for advanced manufacturing, research, commercial space, and new homes. In parallel, strategic site acquisitions and remediation works in Shawfield continue, reinforcing our commitment to future development and enabling private sector investment alongside us.
“Despite uncertainty, Clyde Gateway’s long-term, well-resourced approach and strong public-private partnerships provide solid foundations. The year ahead promises visible transformation and a blueprint for sustainable, innovation-driven communities.”
David Barrett, chief executive of the Electric Heating Company, believes sustainability and energy efficiency will remain central focuses, with electrification accelerating as the industry aligns with net zero targets.
“2026 will be a pivotal year for Scotland’s construction industry. We anticipate strong demand for low-carbon solutions, particularly electric heating technologies, as developers and housing providers seek future-proof alternatives.
“From our discussions with local authorities and housing associations, ASHPs work well in new builds, but retrofit costs and tenant disruption are considerable. Providers are increasingly exploring electric boilers and radiators as practical retrofit options.”
Peebles-based Dave Drimmie, a systems expert and former chief QS, believes construction is on the cusp of a revolution and only those who embrace it will survive.
“In just a few years, we’ll see two types of companies: AI-powered and obsolete. System-first thinking is the lever that unlocks exponential growth. AI isn’t the future. It’s now. And when implemented correctly it will give back to business owners the precious gift of time to do what they do best, namely solving problems, innovating and building value.
“They will gain the freedom to guide their businesses through chaos to clarity, helping them evolve from merely surviving to becoming scalable and ultimately saleable.”
John Forster, founder and chair of Forster Group, said the overriding challenge for construction is scaling up, and delivering scale sustainably.
“Meeting housing demand, the energy transition and retrofitting for net-zero, all require growing capacity, yet ‘doing more’ is not enough. Sustainable scale means building skills, raising standards and ensuring the efficiency to deliver services that are right, first time, every time.
“At Forster Group, we’ve demonstrated this through a trades workforce with an average age of just 30 – proof that industry can recruit, retain and develop talent when it invests in apprenticeships that are both affordable and effective.
“The future depends on doing things differently: embedding innovation, embracing digital and off‑site solutions and resisting the temptation to chase lowest cost at the expense of quality. When we achieve sustainable scale, we don’t just meet targets, we build resilience for the sector and society alike.”
Mark Glasgow, co-founder of Dalkeith-based The Energy Training Academy, highlighted the importance of finding a solution to making apprenticeships work.
“It pains me to say it as I owe my career to one but apprenticeships are dead. I did a four-year plumbing and heating apprenticeship. It gave me a trade, a purpose, a way to provide for my family. But even then it was far from perfect.
“Today it is broken. Apprenticeship wages and overheads keep climbing with employers left covering all costs with no funding support. Kids cannot even choose the trades if they want to. So many are suited to this career but instead we write them off for not being academic.
“It’s not hard to fix. Incentivise employers, train mentors, fund centres that actually deliver results and build real pathways from school to work. The problem isn’t complexity; it’s the structure that it exists in and the will of all of us to change it.”
Stuart Fleming, director of Will Rudd Edinburgh, believes housing delivery will remain challenging in 2026.
“Rising development costs across materials, labour, land values and financing are squeezing viability, while uncertainty around government policy, particularly rent controls, creates further hesitation, where BTR is concerned. In Scotland, without clarity and decisive government intervention, the housing shortfall will deepen.
“Decarbonisation and renewables delivery has featured significantly in our portfolio this year and I’d expect to see continued growth. We’ll continue to meet the ongoing demands of the PBSA sector in delivering high quality student accommodation. We also expect to be active in retail and offices, particularly refurbishments, as these sectors adapt and re-align to suit shifting commercial landscapes.
“At Will Rudd, we remain curious and proactive in tracking trends, ensuring our activities align with what we anticipate coming down the track. We remain committed to upskilling our team, embracing technology, and delivering nimble, efficient solutions to challenging briefs.”
Sticking with housebuilding, Sharifa Joy, sales & marketing manager, Campion Homes, revealed there are clear opportunities for homebuyers around borrowing.
“Greater stability in the mortgage market is helping buyers to focus on future needs, while the introduction of 97% mortgages opens up access to a wider audience. At the same time, the growth in 95% mortgage options is providing more consumer choice, helping more people take their first steps onto the property ladder.
“At Campion Homes we recognise the challenge lies in ensuring buyers are supported to make well‑informed decisions. With more funding options available, the right advice is crucial to avoid confusion and ensure buyers secure the right product for their circumstances. Alongside this, the cost effectiveness of new build properties will continue to grow, with advances in sustainability and energy efficiency delivering long‑term value. At Campion Homes, our agility means we can respond quickly to these trends, guiding buyers with clarity and confidence.”
Ed Monaghan, non-executive director at Perceptive Communicators, believes the built environment faces both challenge and extraordinary opportunity.
“A long-awaited base rate cut would help inject fresh momentum into the housing market which remains subdued. Along with encouraging consumer confidence, we urgently need increased funding, particularly for social housing and meaningful progress in unlocking the planning process. This continues to hold back not only vital development, but also large numbers of much needed skilled jobs and significant economic benefits.
“At the same time, new growth engines are emerging. Data centres, AI innovation zones, renewable energy and green freeports are reshaping demand for infrastructure, all of which
will require significant construction expertise to realise their full potential. In such a transformative year ahead, those who communicate boldly and purposefully will be the ones who truly lead the way.
“Crucially, the sector is still overlooking a great untapped asset: more gender-balanced senior teams. This would strengthen decision-making and drive more profitable outcomes.”
Ronnie Robinson, MD of St Andrews Timber & Building Supplies, said there is no doubt that 2025 was a tough year for the construction industry and the economy as a whole – but he sees room for optimism.
“We have found ourselves in as competitive an environment as many will have seen in their time and have not been immune to the challenges. That being said, there’s plenty to be encouraged about as we move into the new year. The recent advancements in technology have been an exciting development for us and as we evolve, there’s no doubt we are growing closer to our customer base which will bring benefits to everyone going forward.
“We have become very adaptable over the years and one big change we are preparing for is the ever-growing online purchasing trends. AI provides more opportunities and it will be important for the sector to embrace them where appropriate – it is not perfect but it can be a very useful tool when used correctly.”
Mark Heaney, MD, of JHE (Electrical), believes many companies are facing up to the same kind of challenges in respect to the lack of skilled labour.
“As a workforce ages, it’s important to find the younger generation coming through who want to work in this industry. With that in mind, we’re planning to look at bringing in apprentices in a couple of our departments in 2026.
“There has been a slowdown in the spend of some of our customers and we’re anticipating the first couple of months in Q1 are going to be a bit quieter for us. That could all change quite quickly, of course, but I think it’s down to the uncertainty in the world just now, be it at home in the UK in the wake of the autumn budget or, for example, in the USA and the volatile situation with tariffs.”
