The UK construction industry has exhibited early signs of stabilising after experiencing a prolonged downturn, according to recent data. While business activity continues to contract, the rate of decline has slowed, marking a potential shift amid challenging economic and geopolitical conditions.
S&P Global’s monthly construction purchasing managers’ index (PMI) for July rose to 44.7, up from 38.4 in June. Although the reading remains below the 50.0 threshold that signifies expansion, the increase suggests improved sentiment among construction firms. The sector has recorded shrinking activity every month since January 2025, representing the longest continuous decline since the 2008 financial crisis.
The downturn has affected all key subsectors tracked by the survey: housebuilding, civil engineering, and commercial construction. The deterioration in recent months has been linked in part to geopolitical uncertainty, notably the ongoing US-Israeli conflict involving Iran, which has weighed on customer demand. Nevertheless, July data revealed a slower pace of contraction across all these areas, with the housebuilding sector showing notable improvement by reaching its highest activity level since October.
Some companies reported a revival in new tender opportunities and client demand despite subdued economic conditions. Increased activity was observed in residential projects, commercial developments, and transport infrastructure initiatives. Hiring outlooks also suggest some easing, as firms continued to reduce staff but at a more moderate rate compared to previous months.
Input costs, which had surged to a four-year high in May, rose at a slower pace in July. Firms cited ongoing pressure from fuel surcharges and raw material prices as factors behind these continuing inflationary pressures.
Tim Moore, economics director at S&P Global Market Intelligence, commented on the findings, noting that the data points to a potential turnaround in the sector. He highlighted a more optimistic outlook for business activity in the coming year, with confidence levels reaching their highest since February.
Despite these encouraging signs, the UK construction industry remains cautious given the length of the current slump and persistent external uncertainties. Continued monitoring of sector performance will be critical to assess whether this tentative stabilisation will lead to sustained recovery.