Construction sector suffers worst downturn since 2020

Britain’s construction sector contracted at the fastest pace in more than five years in October, as demand remained weak and job losses mounted. 

The closely-watched S&P Global UK Construction PMI index on Thursday revealed housebuilding and civil engineering construction projects endured the fastest downturn in activity last month.

Job cuts in the sector are rising and staffing levels fell to the lowest level since August 2020, while total output in the industry remained on a ‘downward trajectory,’ S&P Global said.  

The decline in construction sector output and activity emerged amid concerns over Britain’s economy and upcoming tax hikes in the Chancellor’s Autumn Budget. 

The headline S&P Global construction PMI registered 44.1 in October, down from 46.2 in September. A reading of above 50 indicates growth. 

For Britain’s construction sector, last month’s reading gave way to the longest period of continuous decline since the global financial crisis more than 15 years ago. 

Dismal: Britain’s construction sector contracted at the fastest pace in more than five years in October

Most economists had been expecting activity to rise, with the consensus forecast for a reading of 46.7, according to Pantheon Macroeconomics. 

‘Subdued demand in the wake of heightened political and economic uncertainty also led to the steepest drop in input buying since May 2020’, Tim Moore, economics director at S&P Global Market Intelligence, said. 

Civil engineering and housebuilding had the steepest rates of decline in activity, with the latter seeing the fastest contraction for eight months. Business activity within civil engineering fell at the fastest pace since May 2020 last month. 

Residential housebuilding work also ‘decreased markedly’, seeing the sharpest decline for eight months. Labour has vowed to build 1.5million new homes by the end of parliament.   

In a trading update, housebuilder Vistry said on Thursday: ‘Whilst the uncertainty created by the delay to the Autumn Budget has been unhelpful, the Group anticipates that the Budget will provide further clarity on how the Government’s housebuilding ambitions will be supported.’ 

Commercial building activity showed some resilience in S&P Global’s latest construction survey, remaining little-changed since September.

Across all sub-sectors, levels of new work declined. Many firms within the construction sector flagged ‘sluggish market conditions, fewer tender opportunities and delays with the release of new projects’. 

Shrinking workloads and increased payroll costs meant staffing numbers were cut again in October. The rate of job shedding was the steepest for just over five years, with survey respondents noting voluntary leavers were typically not being replaced. 

Amid sluggish demand, input cost inflation across the construction sector eased to its weakest since October 2024. 

Slump: Residential housebuilding work ‘decreased markedly’ in October, S&P Global said 

Analysts at Pantheon claimed there were now risks to fourth-quarter gross domestic product forecasts from the construction activity decline. 

Looking ahead, optimism levels in the sector remained ‘subdued’, but some respondents saw shoots of growth ahead. 

The survey analysis said: ‘Lower borrowing costs, hopes of a turnaround in clients’ risk appetite, and favourable demand projections in areas such as energy infrastructure spending were cited as helping to boost business expectations in October.

Moore said: ‘UK construction companies reported another challenging month in October as the prolonged weakening of order books so far in 2025 resulted in the fastest decline in business activity for over five years. ‘

He added: ‘Looking ahead, business activity expectations for the coming 12 months remained much weaker than the long-run survey average, largely due to worries about fragile investment sentiment and weak sales pipelines. 

‘However, overall optimism levels edged up to the highest since July as the prospect of lower borrowing costs reportedly helped to boost demand projections.’

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