UK construction sector slumps in January
By Abigail Townsend
Date: Thursday 06 Feb 2025
(Sharecast News) - The UK construction sector slumped in January, a closely-watched survey showed on Thursday, as concerns about the economy weighed heavily.
The latest S&P Global UK construction PMI came in far below analyst expectations, tumbling to 48.1 in January from 53.3 a month previously. It is the first time that the index has fallen below 50.0 since February 2024.
A reading above the neutral 50.0 benchmark indicates growth, while one below it suggests contraction.
Analysts had been expecting a reading of 53.4.
Within that, the housebuilding index declined for the fourth successive month, to 44.9, while civil engineering came in at 44.6, although that was partly attributed to the wet weather at the start of the year.
Output in the commercial construction sector, meanwhile, returned to contraction, falling to 48.9.
Respondents blamed delayed decisions on major projects by clients as well as wider economic uncertainty.
Input inflation, meanwhile, accelerated to a 21-month high, as energy, transport and staff costs all rose.
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 a weak client confidence resulted in subdued workloads.
"Construction firms noted the fastest fall in residential work for 12 months, as market conditions remained somewhat subdued. Anecdotal evidence suggested that caution regarding demand for new projects was prevalent at the start of 2025, despite strong policy support for house building and hopes for a longer-term boost to supply via planning reform."
Matt Swannell, chief economic advisor to the EY Item Club, said: "Overall, as one of the more interest rate sensitive parts of the economy, we think that the sector's prospects will gradually improve over 2025, as interest rates slowly come down, supporting the housing market.
"Although, like the broader economy, the sector will still face some headwinds as it continues to contend with a shortage of skills and elevated labour costs."
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