The UK saw a sustained downturn in business activity across the construction sector, with residential activity seeing the most significant slowdown, according to S&P Global’s UK Construction Purchasing Managers’ Index.
The seasonally adjusted PMI, which tracks changes in total industry activity, registered 44.3 in August, down from 44.7 in July and below the neutral 50.0 value for the twentieth successive month.
August data indicated a sustained downturn in business activity across the UK construction sector, led by weakness in the residential building segment. Survey respondents often commented on subdued demand conditions and a reduction in new projects, especially housebuilding starts.
All three sub-sectors recorded a reduction in construction activity during August, but housing was the only category to register a faster pace of contraction than in July. Residential construction activity stood at 37.6, while commercial activity stood at 47.8, falling at the slowest rate since January, and civil engineering activity registered at 40.5.
Construction companies signalled a fall in total new order intakes during August, but the rate of contraction was only modest and the slowest since September 2025. Anecdotal evidence often cited heightened risk aversion in the wake of the Middle East conflict and delayed decision-making by clients, but some firms noted improvements in infrastructure work.
The PMI also reported another reduction in employment numbers across the construction sector, however, it was the smallest level of job-shedding since February. Participants highlighted a lack of new business to replace completed projects, as well as intense cost pressures as the main causes. However, at the same time, subcontractor usage increased for the first time in just under two years.
Purchasing activity fell sharply in August and at a faster pace than seen during the previous survey period. S&P Global said that softer demand helped to alleviate some pressure on supply chains, but delivery times were broadly stable overall. A number of survey respondents commented on longer international shipping times.
Overall, construction companies remained upbeat about the outlook for business activity during the year ahead, but the degree of positive sentiment decreased from July’s five-month high. Around 38% of the survey panel anticipate an expansion of output, while 20% forecast a downturn. Anecdotal evidence suggested that subdued client confidence, uncertain domestic economic prospects and concerns about the Middle East conflict were the main factors weighing on optimism, although some noted hopes of a turnaround in tender opportunities.
Tim Moore, Economics Director at S&P Global Market Intelligence, said: “UK construction companies experienced another solid reduction in output volumes, with a faster downturn in house building the main reason for a weaker overall performance during August. A sharp and accelerated drop in residential activity more than offset slower falls in the commercial and civil engineering sub-sectors.”
“Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the construction sector. Total new business nonetheless decreased to the least marked extent for 11 months amid reports of support from transport infrastructure work and some pockets of vitality such as data centre roll outs and energy sector projects.”
“Encouragingly, input price inflation eased to its lowest since February and supply chain performance was broadly stable. Softer overall inflation was recorded in August despite upward pressure on operating expenses from higher fuel bills, logistics costs and raw material prices.”
“Business optimism was still subdued, as growth projections for the year ahead eased since July and were much weaker than historic trends. Concerns about geopolitical tensions, lacklustre domestic economic prospects and elevated borrowing costs were all noted as holding back confidence.”
