Total UK construction activity fell for the sixth month running in June, according to the latest monthly survey of industry purchasing managers.
There was a small rising in housing activity but commercial construction and civil engineering continued to decline.
And with a sustained fall in new orders, optimism has sunk to lowest level since December 2022.
At 48.8 in June, the headline S&P Global UK Construction Purchasing Managers鈥� Index 聽(PMI) was up from 47.9 in May. Any reading below 50.0 indicates an overall reduction in construction activity, so things are still getting worse, but more slowly than before.
The good news is that 48.8 is the best monthly reading of 2025 so far.
Commercial work decreased at its fastest pace since May 2020 (index at 45.1), which survey respondents attributed to subdued UK economic conditions and cutbacks to investment spending among clients.
Civil engineering (44.2) fell for the sixth month running and was the weakest-performing area of construction activity.
House-building was the only category of construction work to expand in June (50.7). Higher levels of residential activity were recorded for the first time since September 2024, although the rate of growth was only marginal. Some firms commented on an upturn in new projects and sales pipelines.
New order books across the construction sector as a whole deteriorated for the sixth successive month in June, with the rate of decline accelerating since May. Survey respondents commented on fewer tender opportunities and intense competition for new work, reflecting weak overall demand conditions and heightened risk aversion among clients.
Mirroring the trend for new work, latest data indicated a sustained downturn in staffing numbers. Construction companies have recorded cutbacks to employment throughout the year to date. This was again linked to lower demand and efforts to reduce overheads.
Demand for construction products also softened again in June, the survey indicates. Reduced purchasing activity has been recorded consistently since December 2024, although the latest fall was the least marked for five months.
June data also signalled a sharp increase in purchasing costs across the construction sector. Firms cited higher prices paid for a range of products and materials, including concrete, insulation and timber. However, the overall rate of cost inflation eased for the third month in a row and was the lowest since January.
Finally, business expectations for the year ahead softened in June. Around 34% of the survey panel anticipate a rise in output, while 18% expect a decline. This pointed to the lowest degree of optimism since December 2022. Anecdotal evidence suggested that subdued sales enquiries and worries about the UK economic outlook had weighed on business confidence.
Gareth Belsham, director of Bloom Building Consultancy, commented: 鈥淓ven the most optimistic of builders would struggle to declare the glass half full. Yes the overall contraction in industry workloads continues to ease, and housebuilders even saw output rise in June. That鈥檚 the good news.
鈥淏ut on the other side of the ledger, commercial sector workloads fell sharply, declining at their fastest level since May 2020 - a month when Britain was in the teeth of the Covid pandemic. Infrastructure and civil engineering work contracted even more rapidly.
鈥淏ut the real cause for alarm is the continued decline in new orders - as they are the key to where the industry goes from here. Builders鈥� order books have got progressively thinner every single month in 2025 so far, and this is taking a severe toll on construction industry sentiment.
鈥淭he PMI survey found that among construction contractors, optimism has fallen to its lowest level since December 2022. Those polled reported that fewer projects are coming up for tender, there is intense competition for new work and that staff lay-offs continue.
鈥淎s the ultimate bellwether of broader business sentiment, the fall in demand for construction is another economic warning light for the chancellor to take notice of. In this challenging market, the projects that do get greenlit are laser-focused on value and a fully costed business case - there is minimal margin for error.鈥�
Brian Smith, head of cost management and commercial at Aecom, said: 鈥淭he sector remains under pressure as it works to rebuild momentum after a subdued start to the year, shaped by tight market conditions and a cautious investment climate. But recent policy clarity will help set the sector on a more stable course.
鈥淐larity on capital investment, infrastructure spending and transport upgrades illustrate the intended direction of travel, while the new 10-year Infrastructure and Industrial Strategies outline the roadmap for getting there. Together, they should give contractors and clients greater certainty to plan, procure and deliver growth.
鈥淐rucial now is the detail on private finance. New funding models will be vital if we are to accelerate delivery and unlock the UK鈥檚 infrastructure ambitions. The fact that the government has set out its intentions to develop a new approach to public-private partnerships is therefore hugely welcome.鈥�
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