UK construction sector downturn continues in August
By Michele Maatouk
Date: Thursday 04 Sep 2025
(Sharecast News) - The downturn in the UK construction sector continued in August, according to a survey released on Thursday.
The S&P Global construction purchasing managers' index ticked up to 45.5 from 44.3 in July, but remained below the 50.0 mark that separates contraction from expansion for the eighth month in a row. July's reading was the lowest for just over five years.
Civil engineering was the weakest-performing segment, with business activity falling at the fastest pace since October 2020. Survey respondents again commented on a lack of new projects to replace completed work, S&P Global said.
Meanwhile, the drop in output across the housebuilding segment was the sharpest since February.
Tim Moore, economics director at S&P Global Market Intelligence, said: "Construction activity has decreased throughout the year-to-date, which is the longest continuous downturn since early-2020. August data signalled only a partial easing in the speed of decline after output fell at the fastest pace for over five years in July.
"Sharply reduced levels of housing and civil engineering activity were again the main reasons for a weak overall construction sector performance. Commercial work showed some resilience in August, with the downturn the least marked for three months.
"There were some positive signals on the supply side as vendors' delivery times shortened, subcontractor availability improved and purchasing price inflation hit a ten-month low. However, easing supply conditions mostly reflected subdued demand and a lack of new projects.
"Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August. The proportion of panel members expecting a rise in output over the year ahead was 34%, down from 37% in July and lower than at any time since December 2022."
Matt Swannell, chief economic advisor to the EY ITEM Club, said: "Unlike its manufacturing and services counterparts, the construction PMI had a reasonable track record as a leading indicator of official estimates of output in 2023-2024. But that relationship appears to have broken down this year, with official output growth strengthening as the construction PMI has declined. While it's true that the official data suffers from problems itself, the very weak story from the S&P Global survey does seem hard to align and it's likely to be heavily influenced by shifts in business sentiment following the changes in employer National Insurance Contributions (NICs) and the international trading environment.
"Looking ahead, the outlook for the construction sector is mixed. On the positive side, higher government investment and plans to increase housebuilding should support demand, while a progressive fall in headcount should have eased skills shortages. But heightened uncertainty might lead to some private sector projects being delayed or cancelled, and businesses continue to contend with high labour costs."
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