The headline S&P Global UK Construction Purchasing Managers鈥� Index registered 45.5 in August 2025.
This was better than the 44.3 reading in July, but that was the lowest reading for five years. The index has now been below the neutral 50.0 value every month so far in 2025, indicating eight consecutive months of shrinking construction activity 鈥� the longest period of decline since the 2020 covid outbreak.
August PMI data indicated that a slower reduction in commercial building (index at 47.8) helped to offset steeper declines in residential (44.2) and civil engineering activity (38.1). The latest reduction in output across the house building category was the sharpest since February.
Civil engineering was the weakest-performing segment in August, with business activity decreasing at the fastest pace since October 2020. Survey respondents again commented on a lack of new projects to replace completed work.
The latest reduction was the fastest since May. A number of firms commented on efforts to mitigate rising payroll costs by cutting back on recruitment. Subcontractor usage also decreased markedly in August and at one of the fastest rates seen over the past five years.
The latest PMI survey also indicated a renewed weakening in business optimism across the construction sector. Around 34% of the survey panel predict a rise in output during the year ahead, while 22% forecast a reduction 鈥� the lowest degree of confidence since December
2022. Construction companies reported subdued market conditions, elevated business uncertainty and risk aversion among clients. That said, lower borrowing costs and the prospect of rising infrastructure work were cited as positive factors.
Tim Moore, economics director at S&P Global Market Intelligence, which conducts the monthly survey, said: "Construction activity has decreased throughout the year-to-date, which is the longest continuous downturn since early-2020. 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.
"Sharply reduced levels of housing and civil engineering activity were again the main reasons for a weak overall construction sector performance. Commercial work showed some resilience in August, with the downturn the least marked for three months.
"There were some positive signals on the supply side as vendors' delivery times shortened, subcontractor availability improved and purchasing price inflation hit a 10-month low. However, easing supply conditions mostly reflected subdued demand and a lack of new projects.
"Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August. 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."
Gareth Belsham, director of Bloom Building Consultancy, commented: 鈥淭hings have gone from bad to worse for housebuilders, with residential construction output falling at its fastest rate since February.
鈥淭he rate of decline is more modest in commercial building construction, but this one bright note can鈥檛 mask the overall slowing in the industry.
鈥淥fficial data from the ONS ranked construction as the fastest growing sector of the economy in the second quarter of 2025, but the PMI data suggests momentum is patchy at best.
鈥淢ost worrying of all is the slowing pipeline of new work. New orders have fallen for eight months in a row, and while contractors tend to book projects months in advance, even big names are starting to see their order books thinning out.
鈥淟ittle wonder contractor sentiment is weak and many construction firms are either laying off payrolled staff or freezing recruitment. While some of this can be attributed to the increase in employer National Insurance contributions introduced earlier this year, the use of subcontractors also fell sharply in August.
鈥淣one of this speaks to an industry full of confidence. Just a third of the contractors interviewed for the PMI survey expect output to improve over the next year - a lower proportion than at any time since December 2022.
鈥淵et there are a few glimmers of hope. Last month鈥檚 reduction in the Bank of England base rate should bring some relief to contractors grappling with high levels of debt, and make finance more affordable for developers.
鈥淎nd while deputy prime minister Angela Rayner鈥檚 plan to get 1.5 million new homes built by 2029 is likely to join Whitehall鈥檚 growing list of Quixotic house-building targets, the stability of the commercial construction sector is welcome. Commercial schemes with a clear business case and robust costings are still being approved, but developers and investors are cautious, and value is key.鈥�
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