Residential building activity rose for the first time since September last year, softening the overall downturn in UK construction output in June 2025, as the sector showed tentative signs of stabilisation despite continued weakness in commercial and civil engineering work.
The UK construction sector continued to contract in June, marking its sixth consecutive monthly decline, but a modest increase in housebuilding has helped ease the overall downturn.
While the S&P Global UK Construction Purchasing Managers’ Index (PMI) recorded 48.8 in June, up from 47.9 in May, and 46.6 in April – indicating a slower rate of decline, however, any reading below 50 signals a reduction in output.
Commercial construction saw the sharpest index drop to 45.1, the lowest since May 2020, as weak economic conditions and reduced client investment weighed heavily on activity.
Civil engineering also declined for the sixth month in a row to 44.2, making it the worst-performing category.
Its drop reflects the ongoing challenges in public infrastructure projects and subdued client investment.
However, housebuilding brought a little relief, recording a marginal rise in activity – the first since September 2024 with its index recorded at 50.7, helping to soften the sector’s overall downturn.
Some firms reported an increase in new residential projects and a more stable sales pipeline.
Despite this, new orders fell at a faster pace, reflecting weaker demand and growing competition for fewer contracts.
Business optimism dipped to its lowest level since late 2022, with many companies citing reduced client confidence and fewer project opportunities.
Employment and purchasing activity continued to decline, linked to lower demand and overheads, although the rise in material costs showed signs of easing for the third consecutive month, providing some relief on expenses.
Analysts say the slight recovery in housebuilding offers a hopeful sign, but the sector’s overall health will depend on renewed demand and investment in the coming months.
“Shrinking workloads in the commercial and civil engineering segments weighed on total industry activity,” said Tim Moore, economics, director at S&P. “On a brighter note, house building was the best performing area of the construction sector [and] higher levels of residential work were recorded for the first time since September 2024 amid some reports of more stable demand conditions.”
‘Confidence building in construction’
Kelly Boorman, national head of construction at RSM UK, said: “The headline PMI ticked up slightly for the fourth consecutive month, however the index is still below 50 and contracting amid ongoing housebuilding challenges, labour shortages and a slowdown in planning approvals.
“Although overall construction activity remains at a relatively low level, housing activity has seen an increase to the highest level since September 2024, which suggests confidence is returning to the market.
“This implies that recent government announcements to remove red tape and unlock new homes are finally mobilising projects despite market uncertainty around house prices and planning delays.”
She noted that subcontractor shortages and rising costs pose challenges to meeting demand, but upcoming visa changes and government initiatives like the National Housing Bank and planning reforms could help ease pressures and boost industry confidence.
Was this interesting? Try: Construction outlook mixed as costs rise and sector awaits investment clarity
If you have a tip or story idea that fits with our publication, please contact danielle@wavenews.co.uk
Get industry news in 5 minutes!
A daily email that makes industry news enjoyable. It’s completely free.
