Output levels in UK construction fell again in July, but at their slowest rate in four months, according to the latest Purchase Managers’ Index (PMI) from S&P Global.
PMI output for July came in at 44.7, up from 38.4 in June, reaching its highest level since March. Any reading below 50 indicates a contraction in activity.
S&P Global’s UK Construction PMI has been below 50 for every month since January 2025, the longest continuous stretch of decline since the global financial crisis of 2008.
The slower rates of contraction were seen across all three main divisions within the construction sector, S&P Global noted. Commercial work came in at 46.8, civil engineering registered 38.3 and housebuilding activity recorded a reading of 41.8, its slowest decrease since October last year.
“July data suggests that the performance of UK construction sector has started to stabilise after a sharp downturn throughout the second quarter of 2026,” said Tim Moore, economics director at S&P Global Market Intelligence.
“Business activity levels continued to decline in all three main categories, but in each case the rate of contraction was much slower than in June.”
Meanwhile, S&P Global PMI revealed that total new business received by construction companies fell at the slowest pace for 10 months in July, with some companies pointing to a recent improvement in tender opportunities, including for commercial development, residential projects and transport infrastructure work.
Having said that, many of the survey’s respondents also noted that demand was continuing to take a battering from geopolitical uncertainty and the weakened economic conditions in the UK.
The PMI also showed input price inflation eased further from the peak it hit in May, which was the highest reading in almost four years. And even though inflation remained a big concern for purchasing managers, the July reading was the slowest increase in average cost burdens since February.
“Companies reporting higher purchasing costs typically linked this to fuel surcharges and rising prices paid for raw materials,” S&P said.
Carly Thorpe, construction and engineering partner at law firm Walker Morris, said the PMI readings gave reasons for “cautious optimism”.
“Slower rates of contraction and the government’s focus on planning reform, infrastructure investment and greater regional powers should help boost sector optimism and unlock growth,” she said.
Looking ahead, the PMI survey also showed the most optimistic picture since February.
Expectations of business activity for the year ahead remained positive in July, with around 38 per cent of respondents predicting an expansion and only 17 per cent forecasting a decline.
“Survey respondents commented on signs of a turnaround in client demand and a revival in new tender opportunities in some cases, despite subdued underlying market conditions,” Moore said.
“This contributed to more upbeat business activity expectations for the year ahead, with confidence levels the highest since February.”
Nonetheless, the long-term prospects for UK construction will be a function of how effectively the industry can modernise, said Scott Smyth, managing director in supply chain and engineering at Accenture.
“Construction faces a pressing need to boost productivity and deliver increasingly complex projects at scale, from housing and transport to data centres,” he said.
“The firms best placed to succeed will be those investing in AI, digital engineering, data-driven delivery and a workforce equipped with the skills to use them.”
