UK construction downturn slows to weakest pace since January

The S&P Global UK Construction Purchasing Managers' Index rose to 46.1 in September, up from 44.3 in August, marking the slowest contraction in industry output for eight months. The reading remains below the 50 threshold that separates growth from decline, but the pace of decline eased across all three sub-sectors: residential, commercial and civil engineering.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: "The downturn in UK construction output was the least marked since January. All three sub-sectors have seen a degree of stabilisation relative to the rapid declines reported in the second quarter of 2026."

Which segments are holding up?

Commercial construction showed the greatest resilience. Its index reached 48.5 in September, with business activity falling only marginally and at the weakest pace since May 2025.

"In September, commercial building work saw its smallest fall in activity since May 2025," Moore said.

House building told a different story. Housing activity posted an index reading of 40.7, making it the worst-performing area of the construction sector for another month.

"House building was again the weakest performer as rising borrowing costs and unfavourable market conditions weighed on output," Moore said.

What is happening to new orders?

Total new orders stayed relatively subdued in September. Construction firms reported longer sales conversion cycles, and clients deferred decisions on major projects.

Firms attributed the slowdown to:

• subdued demand;
• geopolitical tensions;
• pressure from sharply rising input costs.

Input price inflation softened for the fourth consecutive month, but Moore questioned whether that trend can last. "This trend seems unlikely to endure given recently escalating fuel prices and transportation costs," he said.

How optimistic are construction firms?

Construction companies remain optimistic on balance about their growth prospects for the next 12 months, but confidence has weakened. Around 31% of survey respondents expect a rise in business activity, while 21% predict a decline.

The overall degree of confidence signalled during September was the lowest for four months and much weaker than in August.

"Softer order books, elevated inflationary pressures and concerns about rising borrowing costs were all reasons for construction companies to moderate their year ahead growth expectations during September," Moore said. "This led to a sharp drop in business optimism to its lowest since May."

Forthcoming infrastructure work supported business optimism. Firms typically cited domestic political uncertainty, weak housing market conditions and strong inflationary pressures as headwinds to growth.

With house building still contracting sharply and borrowing costs weighing on client decisions, the September improvement points to stabilisation rather than recovery — and Moore's warning on fuel and transport costs suggests input inflation may yet test that fragile balance in the months ahead.