UK construction output contracts for fourth consecutive month

The S&P Global UK Construction PMI edged up slightly to 46.6 in April 2025 from 46.4 in March, marking the fourth consecutive month of contraction in the sector, as persistent business uncertainty and tighter financial conditions continued to weigh heavily on activity.

UK construction output contracts for fourth consecutive month

Despite the marginal improvement, the index remained well below the 50.0 threshold that separates growth from contraction, underscoring the ongoing challenges faced by the industry. Developers continued to delay or cancel planned projects, with high borrowing costs, political instability, and the uncertain impact of US-EU trade tensions further denting confidence in the commercial property market. Civil engineering remained the worst-performing segment with a reading of 43.1, reflecting weak public infrastructure spending and delays in large-scale transport and utility projects. Commercial activity also contracted sharply at 45.5, hit by a combination of high vacancy rates in office spaces and subdued investor appetite. In contrast, residential construction provided a relative bright spot, with the PMI at 47.1—the mildest decline in the housing segment so far in 2025—supported by a modest uptick in mortgage approvals and tentative signs of price stabilization in some regions.

New orders decline again

New order volumes continued to decline, particularly in the public and commercial sectors, contributing to a further drop in overall workload and prompting firms to reduce purchasing activity at the fastest pace in nearly five years. However, one positive development was the continued improvement in supplier delivery times, which shortened for the third straight month, indicating easing supply chain pressures and better logistics performance. Despite the downturn in output and demand, cost inflation persisted. Input prices remained elevated, driven by stubbornly high payroll costs and increases in materials such as insulation, cement, and structural steel. Employment in the sector also declined, although the pace of job losses eased slightly compared to the previous month, suggesting that firms are seeking to retain key talent in anticipation of a medium-term recovery. Encouragingly, business sentiment strengthened, with confidence levels rising to their highest since December 2024. This optimism was mainly rooted in expectations of increased activity in the residential sector later in the year, supported by government incentives for first-time buyers and a possible loosening of planning regulations. Firms also cited hopes for lower interest rates in the second half of the year, which could help revive project pipelines and attract new investment. Nonetheless, risks remain tilted to the downside. Any sustained improvement will likely hinge on macroeconomic stabilization, policy clarity, and a recovery in private sector demand. Until then, the UK construction sector appears set to remain in a fragile state.