Workloads fell in January as inflation soared to a 21-month high, according to the S&P Global UK Construction PMI.
The construction sector notched up just 48.1 on the seasonally adjusted index last month, below the 50 point mark indicating no change in workload — and a steep drop from 53.3 in December.
This is the first time workloads have fallen since February 2024, according to the metric. Building firms have blamed macroeconomic conditions and delayed project starts from clients for the drop in work.
The sharpest decline in work was in the civil engineering sector, which scored 44.6, although S&P Global said this was likely due to “unusually wet weather at the start of the year”.
Housebuilding scored 44.9, a fourth successive month of falling workloads and the sharpest drop since January 2024. Firms in S&P’s survey acknowledged “subdued market conditions in the residential building sector”.
Commercial construction suffered the smallest contraction, scoring 48.9, which contractors blamed on a lack of tender opportunities and a reluctance from clients to commit to projects.
The Construction PMI also suggested a return to inflation, recording the steepest rise in input costs since April 2023 as suppliers sought to pass on rising energy, transport and staff costs.
Increased costs came despite softer demand, with the PMI saying purchasing activity had dropped for the second month in a row due to weak order books.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction output fell for the first time in nearly a year as gloomy economic prospects, elevated borrowing costs and weak client confidence resulted in subdued workloads.
“Output levels decreased across the board in January, with particularly sharp reductions seen in the residential and civil engineering categories.
“Anecdotal evidence suggested that caution regarding demand for new projects was prevalent at the start of 2025, despite strong policy support for housebuilding and hopes for a longer-term boost to supply via planning reform.”
Jordan Smith, technical director at Thomas & Adamson, said: “The overall construction PMI reading falling into negative territory for the first time in nearly a year is not unexpected – accelerating cost inflation, weaker economic conditions, and higher borrowing costs have slowed the sector’s recovery.
“Despite policy support for the likes of housebuilding and civil infrastructure, these are seeing some of the weakest levels of activity on the ground. Still, we expect to see further detail about the government’s spending plans in the coming months and would hope that this will provide much-needed stimulus to the sector.”
Josh Ward-Jones, director of Bloom Building Consultancy, said: “The warning lights on the construction industry dashboard have switched from amber to red.
“Many are blaming the slowdown in demand on the hit to business confidence seen in the wake of last October’s Budget. Companies worried about their business prospects and the impact of April’s jump in Employer National Insurance Contributions have been quick to pause or rein in capital spending.
“This slowdown is being reflected in construction firms’ sentiment too. The PMI survey found that just 38 per cent of contractors expect business activity to increase over the next year – the lowest level since October 2023. As recently as a month ago, the figure stood at almost half.”
