In 2026, the construction industry’s growing pains are not a 'winter'—they represent a complete blood transfusion.

Over the past two years, all professionals in the construction sector have shared a common confusion: although the industry has not completely collapsed, the days of making money are truly over. It is not merely a temporary downturn in market conditions, but rather the entire logic—the foundational framework—that sustained, enriched, and supported families across the construction industry for the past two decades—is now being thoroughly dismantled. Winning bids has become increasingly difficult; bidding prices have been slashed to rock-bottom levels; advance funding has become standard practice; and payment recovery drags on interminably. Design institutes are downsizing and laying off staff en masse; construction firms are enforcing enterprise-wide cost-cutting and efficiency-enhancement measures; and countless established private engineering companies have quietly ceased operations. Everyone says the construction industry has entered a transitional period of painful transformation. Yet most people only feel the pain without grasping its essence: this is not a cyclical, short-term ‘winter’ nor a simple trough in the business cycle—it is a once-in-thirty-years, fundamental, systemic overhaul of the entire industry. The old dividends—demographic, urbanization-driven, and real-estate-related—have fully run their course. Meanwhile, new industry rules, technological systems, and profit models are just beginning to take root. This transitional phase—where the old fades before the new fully emerges—is the very ‘pain’ each of us must endure head-on. 01 Why does the sense of pain peak in 2026? No subjective speculation is needed—several sets of real data reveal the industry’s harsh reality. In the first half of 2026, national fixed-asset investment and the construction industry’s added value continued to decline, while the sector’s overall gross profit margin fell to a record low in recent years. Countless construction enterprises find themselves trapped in an awkward deadlock: projects and revenue exist on paper—but profitability is nonexistent, and many projects even incur losses. The residential and commercial real estate sectors—once accounting for half the industry’s output—have contracted comprehensively, with new construction starts plummeting off a cliff. A large number of design institutes and small-to-medium construction teams that long relied solely on housing projects have suddenly lost their core source of livelihood. Meanwhile, local government finances are strained, traditional infrastructure investment growth has dried up, and once-booming PPP projects have significantly receded. The construction industry has definitively bid farewell to its era of ‘projects everywhere, blind bidding, guaranteed profits.’ Even more piercing than shrinking market segments is the full eruption of deep-rooted industry malpractices: low-bid winning, vicious internal competition, full advance funding, and chronic payment delays—these are no longer isolated incidents but entrenched industry norms. Today’s construction industry has already shattered everyone’s prior understanding: it is no longer ‘the more you build, the more you earn,’ but rather ‘the more you build, the higher the risk, the thinner the margins, and the tighter the cash flow.’ Many habitually cry out, ‘The industry is cooling down’—but that’s simply inaccurate. This is the inevitable pain accompanying the definitive end of the era of incremental growth and the full onset of cutthroat competition within a mature, saturated market. For twenty years, buoyed by three epochal dividends—urbanization, real estate, and infrastructure—the construction industry raced forward unchecked. Even with crude management, outdated technology, and reliance solely on labor-intensive tactics, anyone willing to work hard, with connections and resources, could reliably earn money. Now those dividends have entirely evaporated, and the industry is aggressively bursting bubbles, eliminating inefficiency, and purging redundancy. All enterprises that rode the wave of era-driven windfalls—and all practitioners who coasted on seniority and outdated routines—are now being re-evaluated, re-priced, and systematically eliminated by the market. 02 True suffering never lies with the industry itself—but with those left behind Don’t just complain that the industry is failing; what’s truly failing is the outdated path, mindset, and skillset unchanged for a decade. In the past, success in construction hinged on connections, resources, low pricing, and abundant manpower; Today, that playbook has completely lost its relevance. The Matthew effect in the industry has intensified dramatically: central SOEs and state-owned enterprises—leveraging advantages in capital, qualifications, technology, and regulatory compliance—secure virtually all high-quality projects with ease. Meanwhile, small and medium-sized contractors, boutique design institutes, and practitioners surviving on qualification affiliations or information asymmetry face rapidly shrinking survival space.

Moving Forward Toward the New, Advancing Toward Excellence, Thriving Toward Quality—Transformation and Breakthroughs for Construction Enterprises

On July 31, 2026, Premier Li Qiang presided over a State Council executive meeting. The meeting emphasized implementing more concrete measures to sustainably propel the economy toward novelty, excellence, and quality, striving for a strong start to the 15th Five-Year Plan (2026–2030); effectively expanding domestic demand; accelerating implementation of major projects outlined in the 15th Five-Year Plan; and steadily advancing the planning and construction of the ‘Six Networks.’ ‘Toward the New, Toward Excellence, Toward Quality’—these six characters chart the course for China’s macroeconomic policy and also point the way forward for the construction industry’s breakthrough. Yet, as this grand blueprint unfolds, the construction industry is undergoing unprecedented growing pains. Great eras demand broad vision; profound transformations call for bold breakthroughs. For traditional construction and contracting enterprises, transformation is no longer an optional question—it is a mandatory one. Those who can ride the tide, harness momentum, and create new impetus will seize the initiative and break through on the new赛道 (race track) of the 15th Five-Year Plan. 1 Dilemma: The industry has never been this difficult In 2026, the construction industry is undergoing comprehensive, deep-seated restructuring. Orders are vanishing. In Q1 2026, newly signed construction contracts declined 11.1% year-on-year, and output dropped 6.8% year-on-year, reflecting substantial downward pressure on overall demand—the chill permeating every market participant. Profits are collapsing. In 2025, net profits attributable to shareholders at major listed construction firms fell 22.4% year-on-year; in Q1 2026, the decline continued, with industry revenue down 6.2% and net profits attributable to shareholders down 14.1%. ‘Revenue growth without profit growth’ and ‘output growth without efficiency gains’ have become widespread phenomena. Even central SOEs are buckling. In Q1 2026, six of the eight major construction central SOEs reported declining net profits, with several registering drops exceeding 20%. Even industry leaders openly acknowledge that the 15th Five-Year Plan period may well be the make-or-break five years for the construction industry. Capital is devouring enterprises. Across the board, the long-standing dilemma of advance funding and delayed payments persists; accounts receivable and inventory remain stubbornly high, locking up enormous working capital. Project payment cycles continue lengthening—signing contracts yields no profit; generating revenue yields no cash. This has become a chronic ailment across the entire industry. 2 Root Causes: Old Maps Cannot Locate the New Continent Beneath this dilemma lie three overlapping structural contradictions. First, shifts in demand structure. Real estate remains persistently sluggish; local infrastructure investment is slowing. In the first half of 2026, the real estate sector’s added value edged down 0.2% year-on-year, while the construction sector’s added value slid 4.0% year-on-year; together, they accounted for just 11.1% of GDP—a clear signal that the industry is shifting from large-scale, incremental expansion to quality-oriented optimization and efficiency enhancement within existing capacity. Second, constraints in business models. For years, numerous construction firms relied on qualification affiliations, advance-funded construction, and scale-driven expansion—a crude, inefficient model. They earned cabbage-level profits while bearing heroin-level risks. Refusing projects jeopardized qualification maintenance; accepting them meant being crippled by advance funding. Third, changes in competitive landscape. High-quality projects are dwindling, intensifying market competition. Central SOEs, leveraging resource endowments and strategic positioning advantages, continue consolidating market dominance: their share of newly signed orders rose from 27.98% in 2010 to 51.25% in 2025. Market share is rapidly concentrating at the top, drastically compressing survival space for smaller players. 3 Riding the Tide: Only by understanding the big picture can we avoid losing our bearings

UK's SIG warns of first-half profit fall as construction slump drags on

Apr 29, 2026

British building material supplier SIG warned of lower first-half profits following a 5% drop in Q1 sales, driven by poor weather and a prolonged construction downturn across Europe.

reuters

2026-04-29

UK's SIG warns of first-half profit fall as construction slump drags on

UK's SIG warns of first-half profit fall as construction slump drags on

FAQ