UK construction sector declines at faster pace than expected in August

The UK construction sector's downturn deepened last month, amid a reduction in new projects and weak demand, a survey from S&P Global showed on Friday.

The construction purchasing managers' index fell to 44.3 points in August, from 44.7 in July. Falling further behind the 50-point neutral mark, the reading suggests the sector suffered a deeper contraction last month. The reading fell short of the FXStreet-cited market forecast of 45.9 points.

It is the 20th month in-a-row that the UK construction sector has declined, S&P Global said.

"Survey respondents often commented on subdued demand conditions and a reduction in new projects, especially house building 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," S&P Global noted.

"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."

Purchasing expenses increased, on higher fuel costs, raw material prices and transportation. However, input cost inflation cooled to its tamest level for six months.

"Construction companies were still upbeat on balance about the outlook for business activity during the year ahead, but the degree of positive sentiment eased from July's five-month high," S&P Global said.

"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."

The construction survey features a panel of 150 firms in the UK. Responses were collected in the second half of the year.

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