UK Construction Activity Contracts Further

The S&P Global UK Construction PMI fell to 44.5 in February of 2026 from 46.4 in the previous month, contrasting with expectations that it would improve slightly to 47 to reflect a deeper contraction in the British construction activity. Firms surveyed reported lower levels of new orders, magnifying the impact of new project starts amid low demand from clients and bad weather on sites. Residential building construction declined at the fastest pace among activity groups, followed by civil engineering output and commercial space construction, which also dropped sharply. Still, business confidence improved to its highest since December of 2024, with the panel expecting new contract wins and a turnaround in economic conditions.

The S&P Global UK Construction PMI rose to 46.4 in January 2026, rebounding from December’s five-and-a-half-year low of 40.1 and exceeding market expectations of 42.0. While this marked the strongest reading since June 2025, the index signaled a continued contraction in construction activity. House building was the weakest-performing segment, although the rate of decline eased to its slowest pace in three months. Civil engineering activity also contracted sharply, while commercial construction showed the smallest decline since May 2025, as some firms cited improved post-Budget clarity and a modest recovery in investment sentiment. Total new orders fell at the slowest rate in three months, suggesting early signs of stabilization, though employment continued to decline at a marked pace. On the cost side, input price inflation accelerated to a four-month high. Business optimism improved to its strongest level since May 2025, but confidence remained well below its long-term average.

The S&P Global UK Construction PMI rose to 40.1 in December of 2025 from the over-five-year low of 39.4 in the previous month, but the reading still reflected a full year of monthly contractions for the second-sharpest decline since the Covid pandemic shock to the sector. Companies in the sector cite fragile confidence for clients that resulted in a sharp reduction in new orders to replace completed projects. Surveyees also noted that clients delayed investment decisions due to uncertainty of how the UK's new Budget would alter their sales pipelines. Civil engineering activity fell sharply (32.9 vs 30 in November), while both housing activity (33.5 vs 35.4) and commercial construction (42 vs 43.8) dropped the most since May 2020. Still, over one third of the sector forecasted improved conditions next year, ahead of one fifth that predicted a decline, with firms citing new work in the utilities sector and broad support form lower interest rates.