UK Construction Activity Drops More than Anticipated

The S&P Global UK Construction PMI eased to 44.3 in August of 2026 from 44.7 in the previous month, missing expectations of 45.5. Survey respondents noted fresh weakness in demand conditions from clients that caused a drop in new projects, especially in residential construction starts, amid lower risk sentiment as the war in the Middle East raises both energy prices and borrowing costs. The residential work index slumped to 37.6, while civil engineering activity dropped to 40.5 and commercial construction activity fell to 47.8. Consequently, aggregate construction firms reduced head counts. Input cost inflation picked up on larger transportation bills, raw material prices, and fuel costs. Looking ahead, companies were still upbeat for the year ahead due to expectations of new tender opportunities.

The S&P Global UK Construction PMI rose to 44.7 in July of 2026 from 38.4 in the previous month, extending the rebound from the six-year low of 38.2 in May to reflect some consolidation since the outbreak of war in the Middle East negatively impacted the sector. Commercial work was the subsector that slowed the least, followed by house building activity and civil engineering activity. Aggregate new business received by construction companies fell at a slower pace from June amid a turnaround in tender opportunities. While energy and raw material cost inflation softened from the earlier, improving signs in the Middle East allowed for a pickup in orders. Consequently, employment also fell at a softer pace. Looking ahead, a larger portion of surveyees predicted business expansion in the coming months than those anticipating a decline.

The S&P Global UK Construction PMI edged up to 38.4 in June 2026 from 38.2 in May, below market expectations of 40 although business sentiment is highest since March. Commercial construction proved the most resilient, while housebuilding and civil engineering weakened sharply. New work declined, driven by fewer housebuilding projects, weak business investment, and intense competition for contracts, despite stronger opportunities in the defence and energy sectors. Employment fell for the 18th consecutive month, alongside a sharp reduction in subcontractor use. Softer demand eased supply chain pressures, with fewer delivery delays and higher inventories, although supplier performance deteriorated from March. Cost pressures intensified due to higher raw material, wage, and transport costs. Looking ahead, 38% of firms expect activity to increase, compared with 19% anticipating a decline, supported by upcoming public and infrastructure projects.