UK Construction Activity Contracts For Fourth Straight Month Amid Rising Costs And Uncertainty

The UK construction sector is facing another challenging period as new data reveals that activity contracted for the fourth consecutive month in April. Despite a brief bounce-back at the end of 2024, the start of this year has been marked by stalled momentum and rising costs, according to the latest industry survey.

S&P Global’s construction purchasing managers’ index (PMI) edged up slightly to 46.6 in April from 46.4 in March, yet remained significantly below the 50-point threshold that indicates growth. This sustained contraction signals continued difficulties for firms navigating a challenging economic landscape, with heightened business uncertainty and soaring raw material prices weighing heavily on decision-making.

The housebuilding sector was a relative bright spot, with declines slowing compared to other sectors. Nevertheless, commercial construction output dropped at its sharpest pace in nearly five years, as risk aversion grew amongst clients. Politically, lingering uncertainty following Labour’s election victory last July, as well as delays in decisions concerning major public infrastructure investments ahead of the government’s spending review on 11 June, have compounded the sector’s challenges.

Industry analysts cite external factors, such as concerns over Donald Trump’s global import tariffs, as key contributors to delays in the commercial construction sector. Suppliers have also reported passing on rising payroll and raw material costs to construction firms, further exacerbating the financial strain.

Despite these headwinds, data from industry provider Glenigan points to signs of recovery, particularly in housebuilding. Private housing construction activity rose by 22% on a quarterly basis and grew 29% year-on-year. Meanwhile, residential projects valued under £100 million increased by 24% over the three months to April, and social housing construction activity grew by 29% from the previous quarter, though it was only slightly higher than the same period in 2024.

Experts, including Brian Smith from the engineering firm AECOM, remain cautiously optimistic about the rest of the year. Smith noted that the sector would benefit from greater clarity in government policies to support large-scale projects. He urged ministers to use the upcoming spending review to deliver a roadmap for engaging private investment through public-private partnerships, which could help revitalise activity in civil engineering.

Although the outlook is fraught with challenges, many firms expect improvements in the months ahead, particularly in residential construction. A clear commitment from policymakers on long-term funding strategies could provide the much-needed boost to restore momentum to the sector.