Activity in the UK housebuilding sector declined at its fastest rate so far this year in June, according to the latest S&P Global UK construction Purchasing Managers’ Index (PMI), which also showed the broader construction industry remained in contraction. The PMI recorded a reading of 38.4 in June, a slight increase from May’s six-year low of 38.2 but still signaling one of the steepest declines in output since the onset of the COVID-19 pandemic. The PMI uses a 50-point threshold to indicate expansion or contraction, with figures below 50 reflecting a decrease in activity.

Both housebuilding and civil engineering sectors saw sharper falls in activity compared to May, with civil engineering posting its weakest performance since early 2020. In contrast, commercial construction recorded a slower pace of decline, representing the only sub-sector where contraction eased somewhat.

Despite the ongoing challenges, some analysts suggest the sector may have reached a turning point. Kiran Raichura, chief commercial real estate economist at Capital Economics, noted that after three consecutive months of decline, the headline construction PMI showed a marginal rise in June, pointing to a potential stabilisation. Raichura added that forward-looking expectations were improving; however, the impact of prior increases in input prices is likely to continue affecting construction costs in the near term. He also emphasized that activity levels remain subdued across both the commercial and housing markets.

The report highlighted a reduction in cost pressures during June, with supply chain disruptions easing compared to previous months. Delays in shipping declined notably from the more severe disruptions seen in April and May. Business sentiment among construction firms rebounded as well, with 38% of survey respondents projecting an increase in activity over the next year, while 19% anticipated a decline. This marks a recovery from the six-month low in optimism recorded in May.

Tim Moore, economics director at S&P Global Market Intelligence, underscored that new construction work declined at its slowest rate since March despite challenging market conditions. Construction companies cited headwinds such as weak housing sales, elevated interest rates, and constraints on consumer finances, combined with reductions in business investment plans. Delays in infrastructure projects and fewer public sector tender opportunities were also mentioned as factors weighing on the sector.

Overall, while the UK construction industry continues to face headwinds, recent data suggest it may be stabilizing after a prolonged period of contraction.