The construction industry enters 2026 facing both persistent headwinds and emerging opportunities. Rising material costs, ongoing labor shortages, and policy uncertainty continue to challenge business owners. But at the same time, there’s an undercurrent of guarded optimism as the industry enters 2026. Here’s what construction companies need to know to plan for success in the year ahead.
Labor Shortages and Wage Pressure Continue
The labor shortage in construction is unlikely to go away in 2026. With many experienced workers retiring and fewer younger, skilled workers entering the industry, the competition remains strong for skilled talent. This is driving upward wage pressure.
Contractors should focus on workforce training programs to foster internal talent, employee retention efforts that go beyond pay, and productivity improvements through better scheduling and technology.
Material Costs and Tariff Uncertainty
Trade policy is a wild card. Tariffs on key materials like copper, steel, and plastics are still in play and could increase costs even more. Given the current uncertain roadmap for trade deals, pricing volatility could persist throughout the year.
That said, federal tax incentives could boost domestic production and help ease pressure on supply chains. In the short term, though, business owners should expect price swings.
Smart moves include:
- Strengthening relationships with suppliers and securing long-term supply agreements
- Focusing on long-term financial planning, including building in contingency budgets
- Improving your forecasting and cash flow planning
Economic Signals: Mixed but Stabilizing
Construction activity slowed in 2025, largely due to high interest rates and uncertainty surrounding federal policy. Commercial construction was especially uneven. But 2026 may bring some recovery, driven by:
- Better financing conditions if interest rates continue to ease
- Clarity on federal policies that could revive delayed projects
- New tax credits that spark demand for specific projects
Still, recovery will likely be uneven. Public infrastructure has remained a bright spot thanks to the Infrastructure and Jobs Act of 2021, but that funding is set to expire in October 2026. Without additional supportive legislation, public-sector activity could slow significantly after 2026.
How to Prepare for 2026
To stay competitive, construction businesses should:
- Invest in workforce training and prioritize employee retention. Focus on your current team with on-the-job training, mentorship, and safety certifications. Investing in your crew reduces project delays and helps retain your best workers.
- Tighten cost estimation and build in price flexibility. Update your cost estimation strategies to account for fluctuating material costs and wage increases. Include contingencies in your bids to protect margins.
- Monitor trade and tax policy. Keep an eye on tariffs and federal tax incentives that may impact project pipelines.
- Improve cybersecurity. If needed, upgrade your systems to protect sensitive project data and employee records. Use multi-factor authentication and encrypted file storage.
For construction business owners, 2026 is likely to be a balancing act between opportunity and caution. But when you focus on resiliency and efficiency, you’ll be able to handle the swings in demand and capitalize on opportunities.
