Output levels fell again in the UK construction sector, but at the slowest pace since March, according to S&P Global’s latest UK Construction PMI. The index says that this has contributed to a sustained rebound in business activity expectations for the year ahead.
The data also shows that supply chain performance improved and input price inflation eased to a five-month low.
The Purchasing Managers’ Index, which tracks changes in total industry activity, reached its highest level for four months in July at 44.7, and remained below the neutral 50.0 threshold. However, reduced volumes of business have now been recorded since January 2025, the longest continuous period of decline since the global financial crisis.
Much slower rates of contraction were seen in all three main sub-sectors in July. Housebuilding activity decreased at the least marked pace since October 2025, with the index standing at 41.8, while commercial work showed the greatest resilience at 46.8. Civil engineering activity again saw the steepest pace of decline at 38.3.
In terms of new business received by construction companies, July saw the slowest pace of decline for 10 months. S&P Global says that some firms had noted a recent turnaround in tender opportunities, including for commercial development, residential projects and transport infrastructure work. However, many survey respondents also noted that heightened geopolitical uncertainty and subdued domestic economic conditions continued to weigh on customer demand.
Following a similar trend, the latest data showed a softer reduction in employment numbers across the construction sector, with the slowest rate of job losses since February. At the same time, subcontractor availability improved to the greatest extent since April 2025.
Purchasing activity also declined in July, albeit the least marked since September 2025. Softer demand for construction products and materials, alongside fewer reported instances of transportation delays, contributed to an improvement in supplier performance for the first time in five months.
Looking ahead, business activity expectations for the year ahead remained positive, with around 38% of those surveyed predicting an expansion compared to 17% anticipating a decline. This represents the strongest level of optimism in the sector since February. Survey respondents noted hopes of a rebound in domestic economic conditions and signs of an improved near-term outlook for customer demand, particularly in relation to infrastructure work.
Tim Moore, economics director at S&P Global Market Intelligence, said: “July data suggests that the performance of the UK construction sector has started to stabilise after a sharp downturn throughout the second quarter of 2026. Business activity levels continued to decline in all three main categories, but in each case the rate of contraction was much slower than in June. This was supported by the weakest reduction in new business intakes since September 2025.”
“Survey respondents commented on signs of a turnaround in client demand and a revival in new tender opportunities in some cases, despite subdued underlying market conditions. This contributed to more upbeat business activity expectations for the year ahead, with confidence levels the highest since February.”
“A renewed improvement in supplier performance and softer input cost inflation were also positive developments in July. Construction companies widely commented on fuel surcharges and higher raw material prices due to the war in the Middle East, but the overall rate of cost inflation was the lowest for five months.”
