UK construction optimism hits lowest in two-and-a-half years? PMI

The UK’s construction sector remained mired in contraction in August, with activity falling for the eighth consecutive month, led by steep declines in the housing and civil engineering sectors, survey data from S&P Global showed Tuesday.

The headline S&P Global UK construction purchasing managers’ index rose to 45.5 points in August from 44.3 in July – which had marked a more than five-year low – but remained well below the neutral 50.0-point mark that separates growth from contraction.

August’s reading signalled another solid drop in total construction output, although the rate of decline moderated slightly from July.

Residential work was among the hardest-hit segments, with its activity index falling to 44.2 points, the sharpest drop since February. Civil engineering fared even worse, slipping to 38.1 points, its lowest level since October 2020. Commercial building was more resilient, with output easing to 47.8 points, the softest pace of decline in three months.

‘Construction activity has decreased throughout the yearto-date, which is the longest continuous downturn since early-2020,’ said Tim Moore, economics director at S&P Global Market Intelligence. ‘August data signalled only a partial easing in the speed of decline after output fell at the fastest pace

for over five years in July.’

Total new work also fell for the eighth month in a row, though the rate of contraction eased to its weakest since January. Survey respondents pointed to ongoing market headwinds, intense pricing competition, and subdued UK economic momentum as key drags on demand.

The downturn in activity and orders weighed on employment, with staffing levels falling at the fastest pace since May. Many firms reported hiring freezes and were not replacing departing staff, in an effort to mitigate rising wage costs. Subcontractor usage also dropped sharply, with one of the steepest falls in five years.

Purchasing activity saw a solid drop, the sharpest in three months, as firms held back on input buying amid a lack of new project starts.

On the price front, input cost inflation slowed to a ten-month low in August, with suppliers increasingly willing to offer discounts amid soft demand. Subcontractor charges also rose at the weakest rate in six months. Meanwhile, delivery times improved and vendor performance strengthened as supply chains eased further.

However, business confidence deteriorated. Just 34% of construction firms surveyed expected activity to rise over the next year, down from 37% in July and the weakest level of optimism since December 2022. Companies cited elevated economic uncertainty and client risk aversion, though some were hopeful about potential boosts from lower borrowing costs and infrastructure projects.

‘The proportion of panel members expecting a rise in output over the year ahead was 34%, down from 37% in July and lower than at any time since December 2022,’ Moore added.

The survey, compiled from responses collected between August 12 and 26, reflects ongoing caution in the sector as the broader UK economy faces a sluggish outlook.

Copyright 2025 Alliance News Ltd. All Rights Reserved.