Where is the MEP Construction Market Heading in the Second Half of 2026?

From what we can see, it's an exciting time across the MEP construction industry.

Over the past couple of months, we've seen a real shift across our London team. Clients who, 8 or 9 months ago, were understandably taking their time are now pushing projects forward, conversations that had gone quiet have started up again and vacancies are appearing with much greater regularity. After a couple of challenging years, it feels as though confidence is finally beginning to return.

That doesn't mean every uncertainty has disappeared, and we're certainly not suggesting the industry is suddenly back to where everyone would like it to be. Towards the end of last year, though, we did share our thoughts that due to the economic uncertainty of that time, 2026 could prove to be a slow burn before momentum began building throughout Q3 and Q4 as delayed projects eventually started moving again. It has been genuinely encouraging to see signs of that beginning to happen.

Interestingly, the wider industry seems to be reaching a similar conclusion. The latest Lloyds Construction Business Barometer reported construction confidence at its highest level of the year, with more than two-thirds of firms expecting business activity to increase over the next twelve months. It certainly reflects the more positive conversations we've been having ourselves.

The more we've spoken about it internally, however, the more we've realised that confidence isn't returning exactly evenly.

One discussion in particular kept coming back to the same point. While we’re seeing commercial projects and the hiring needs for them develop pretty quickly, residential has remained a very different story. Across the team, there was a clear feeling that the increase in confidence we're seeing isn't being shared equally, with commercial projects driving much of the activity while residential continues to face a very different set of conditions. 

So we wanted to dig into this trend for our insight for August…

Why are commercial projects gathering momentum while residential continues to feel much quieter? What are the reasons behind that divide, what does it mean for the businesses operating within those markets and, perhaps most importantly, how should employers and candidates respond if this is the direction the industry is continuing to take? 

Hopefully by the end of reading, we’ll have provided some answers for those questions. 

To start we’d like to clarify that as we started discussing this with the London office, it became clear that not one of us believed residential had suddenly become a less important part of the construction industry. If anything, on a societal level, we’d say it's arguably the opposite. The demand for housing across the UK remains well documented, and successive governments have continued to make increasing housing supply a major priority.

The problem however, is that needing more homes and building more homes aren't always the same thing.

From our MEP Production desk, Kyle was clear that viability was a key issue. Several residential developers appear to be taking a far more cautious approach to new phases than they were previously. If completed properties aren't selling as quickly as expected, or the financial case for progressing to the next stage becomes less attractive, it's understandable why businesses become more reluctant to commit millions of pounds to further development and then more projects for the market to build off of.

Those conversations aren't unique to the clients we're speaking to either. Recent market data has pointed towards a significant slowdown in residential project starts over the past year, while housebuilders continue to balance affordability pressures, financing costs and planning or regulatory challenges before committing to new schemes. None of those issues exist in isolation, but together they create a much more cautious environment for residential development than many commercial sectors are currently experiencing.

From a recruitment perspective, we can see the impact clear as day. 

Recruitment is often one of the first areas where confidence, or the lack of it, begins to show. Delayed developments lead to delayed programmes, subcontract packages move further down the line and hiring plans become far more cautious. Before long, candidates specialising within residential begin noticing fewer opportunities, even though headlines elsewhere suggest the industry is picking up. 

Which is why as much as it’s an interesting dynamic, it has a real frustrating impact for many people. On one side of the market we're seeing businesses becoming increasingly active, and feeling positive about the upcoming months, while on the other we're speaking to experienced professionals and clients who simply aren't seeing the same volume of opportunities. Both experiences are real, they just happen to exist within different parts of the same industry.

So if residential is facing those challenges, where is the confidence we're seeing actually coming from? 

Even when the market was quieter across the board, the majority of the hiring activity we've seen has centred around data centres, commercial fit out and office refurbishments. This trend has stayed the same, but happily the frequency of projects has ramped up. And because of this upturn, this is where clients have been looking to grow teams, move quickly and secure quality, experienced people before somebody else does.

Again, this isn't just something we're experiencing within Streamline. Much of the wider construction industry points in a similar direction. The UK construction market has entered 2026 with growing optimism around commercial development and infrastructure, while continued investment in digital infrastructure means demand for data centre projects remains particularly strong. In fact, market forecasts suggest demand is continuing to outpace available capacity, with take-up expected to exceed new supply for the fifth consecutive year.

Office fit out and refurbishment also continue to present opportunities, particularly as businesses invest in higher quality workplaces rather than simply expanding their footprint. In London especially, strong demand for premium office space and the refurbishment of existing buildings has helped create a steady pipeline of projects, even while wider office construction remains more selective.

So how does this imbalance correct itself?

At first glance, there is an obvious suggestion. If residential is quieter and commercial sectors like these are seeing more investment, surely contractors and candidates simply follow the work?

In reality, it rarely works that way.

One point our team kept coming back to was just how specialised these markets have become. Winning work on a large office fit out, delivering a mission-critical data centre or building long-term relationships within the retail sector isn't something that happens overnight. Clients want to see relevant experience, proven delivery and people who understand the challenges that come with those environments. And because of the economic hardships and instability we’ve all been subject to in recent years, reputation is a key player. Investment needs trust and reliability behind it.

We've seen first-hand that businesses looking to establish themselves within growing markets often aren't just hiring to fill vacancies. They're hiring to bring in experience, credibility and relationships that can help them compete for work they might not previously have been considered for. 

Sometimes, one senior hire with the right background can have a much bigger impact than simply adding another pair of hands to a project team. We've even seen examples where bringing in one experienced person has helped businesses establish themselves within growing sectors like data centres because they bring not only technical knowledge, but relationships and credibility built over years in that market. 

For businesses, that's why understanding where the market is moving has become just as important as understanding the market itself.

If you're operating predominantly within the commercial side of M&E, the signs are encouraging, but they also come with their own challenges. Increased activity inevitably means increased competition, not just for projects but for experienced people as well. Waiting until you absolutely need someone before beginning the recruitment process can very quickly leave you chasing candidates who have already committed elsewhere.

On the residential side, our advice is slightly different. While the market may not be moving freely at the same level right now, that doesn't necessarily mean standing still is the right approach. Markets have a habit of turning quicker than many people expect, and businesses that continue investing in key people during quieter periods often put themselves in a much stronger position when confidence returns more broadly.

The same applies to candidates. 

If you've been working predominantly on the residential side, we certainly wouldn't read this and assume opportunities have disappeared. They haven't. There are still excellent businesses delivering fantastic projects and continuing to recruit. What has changed is the volume of those opportunities and, naturally from that, so has the competition for them.

Equally, if your experience lends itself to commercial projects, or you've been considering broadening your exposure into areas like office fit out or data centres, we’ve been advising people down this route for a while now. Nobody builds specialist experience overnight, but every specialist had a first project at some stage. Sometimes the difference between staying in the same market and moving into a growing one simply comes from speaking to the right people before the opportunity is advertised.

Ultimately, that was probably the biggest takeaway from the discussion.

We're not looking at our market at a standstill anymore, instead at one that's moving in different ways depending on where you sit within it.

A year ago, our team would report that conversations were largely centred around whether projects were going to get moving at all. But in the last month or so, they're much more likely to be about which projects are moving, who's investing and where businesses are seeing opportunities emerge.

It'll be interesting to see how that develops over the rest of the year and beyond. All we know is right now, it’s looking like things are moving along positively. So if you are looking to hear about what’s bubbling across the industry, get in touch with one of the team today.