Capital delivery in 2026 - why viability and the need for public sector support still defines the sector

2026 has sharpened the challenges we experienced throughout 2025. Persistently high construction costs, slowdowns in regulatory decision-making, local authority fiscal constraints, and an evolving government policy landscape are converging to create a sector still struggling to move viable schemes from ambition to delivery.

This insight highlights two pressures shaping the market this year; viability and public sector support, and reflects on how current government policy, including the UK Governments Industrial Strategy 2025, influences the trajectory of capital projects. 

Viability remains the sector’s central struggle

Viability continues to dominate discussions across regeneration and development. Construction inflation has moderated but not reversed, and the cumulative impact of multiyear cost increases continues to erode feasibility. Combined with delays from a planning system still carrying significant backlogs, many projects require full re-evaluation before progressing.

The Industrial Strategy speaks to creating “certainty and stability needed for long-term investment decisions”. Yet on the ground, certainty remains limited. In response, sponsors are becoming more pragmatic and financially creative. We are seeing greater use of:

• Risk-sharing joint ventures between public and private partners
• Land value capture mechanisms and ring-fenced business rates to support borrowing
• Place-based investment funds and evergreen vehicles
• Aggregated funding platforms that allow schemes to access capital at scale
• Structured gap funding combining grant, debt and equity 

Placebased investment, which is an explicit foundation of the Industrial Strategy’s design, reinforces the need for locally responsive strategies. Market conditions vary significantly across city regions and devolved areas; a uniform national response is unlikely to work. Local authorities therefore need delivery models rooted in local market evidence, asset strength, and realistic absorption assumptions. Joint ventures and development corporations are increasingly being revisited as mechanisms to share risk, pool expertise, and unlock stalled sites.  

To unlock viability in 2026, both the public and the private sectors need stable policy conditions and flexible financing models that bridge the widening feasibility gap. 

Public Sector support is more critical, and more constrained, than ever

Developers and investors remain clear: without public funding, guarantees, or risk sharing mechanisms, many marginal schemes simply won’t move. The appetite for blended finance models, joint ventures, and land value capture continues to grow. However, Local Authorities are contending with acute resource pressures, limiting their ability to structure and execute complex deals.

The Industrial Strategy 2025 positions public support as a catalyst for “crowding in investment” to drive growth missions and unlock productivity. Translating that ambition into local regeneration outcomes still requires practical tools: flexible grants, borrowing capacity, and mechanisms to de-risk investment.  

From an advisory perspective, the challenge is often not a lack of funding in principle but instead selecting the right combination of funding for the specific scheme. We have increasingly been working with authorities to apply structured “finance toolkits” that assess projects against repayability, risk profile, security strength and market appetite to then identify whether grant, senior debt, subordinated debt, equity, income strips, guarantees or aggregator vehicles are most appropriate. A clearer framework for choosing finance materially improves investability and speeds up decision-making.

The Strategy’s intervention-focused approach reinforces the need for delivery structures that enable collaboration at scale: joint ventures, development corporations, and “build once, use many” funding platforms that reduce duplication across authorities. Aggregated models in particular can pool projects, diversify risk and access capital markets more efficiently than single-scheme solutions. 

To mobilise investment, the UK needs targeted public interventions that de-risk schemes and strengthen the capacity of local authorities to partner effectively. 

2026 needs action, not aspiration 

Across viability and public sector support, the message is consistent: the ambitions of the UK's new industrial policy era will only be realised if delivery systems, funding mechanisms, and regulatory frameworks evolve quickly enough to match them. 
  
Both public and private sectors stand ready to collaborate but without the enabling conditions, even the strongest partnerships risk stalling.

If you’d like to explore these themes further or discuss implications for your programme, please get in touch.