The UK construction industry experienced its slowest decline in activity for four months, as output and new orders both saw a moderate fall between January and May this year, while growth forecasts for the year ahead edged up.
A downturn in construction activity showed “signs of easing” last month, according to market experts, following a period of low output recorded this year to date.
The S&P Global UK Construction Purchasing Managers’ Index (PMI) recorded 47.9 in May, up from 46.6 in April – the slowest reduction in volume since January.
By sector, house building was the weakest performer in May (45.1) following an accelerated downturn in residential construction work since April, while civil engineering also fell for the fifth consecutive month (45.9), and commercial work fell just marginally (49.5).
Contractors attributed a reduction in new orders to delayed decision making among clients and cutbacks to capital spending budgets; purchasing activity fell in response.
Construction companies also reported efforts by suppliers to pass on higher payroll costs, with aggregates, concrete, insulation, and timber products reported up in price.
Employment in the construction sector is a persistent “weak spot”, with jobs disappearing from the industry at the fastest rate since August 2020.
Meanwhile, business activity expectations for the year ahead edged up to the highest since December last year, with firms hoping for a turnaround in the housing market, more infrastructure work, and lower borrowing costs influencing client demand.
“The construction sector continued to adjust to weaker order books in May, which led to sustained reductions in output, staff hiring and purchasing,” said Tim Moore, economics director at S&P. “However, the worst phase of spending cutbacks may have passed as total new work fell at a much slower pace than the near five-year record in February.”
‘New opportunities are beginning to emerge’
Dominic Crichton, senior quantity surveyor at Thomas & Adamson, part of Egis Group, said: “While the PMI reading shows that overall sector activity is still in decline, the fact that this has been the smallest dip for 2025 so far points towards a potential change of direction in the second half of the year.
“A general feeling of cautiousness remains for the meantime, with economic pressures and the impact of employment law changes being felt across the board. Staffing numbers have fallen sharply, which will only add to the industry-wide skills shortage that we are all familiar with. That said, one positive to take from today’s update is that commercial activity seems to be stabilising, which may offer a boost in the months ahead.
“Outcomes from the UK Government’s Spending Review next week may provide further clarity in terms of civil and infrastructure projects across the public sector, providing a confidence boost that many in the industry are seeking. Despite the near-term headwinds, the outlook for 2025 remains cautiously optimistic, and talks with our clients show pipelines are growing modestly and new opportunities are beginning to emerge.”
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