Construction activity declines for the first time since February 2024

Shrinking order books and rising cost pressures during January 2025 contributed to the weakest business activity expectations since October 2023, according to the latest S&P Global UK Construction Purchasing Managers’Index.

During January all three categories of construction work see a reduction in output during January and cost inflation accelerates to a 21-month high. The modest fall in total industry output was recorded at the start of the year, thereby ending a 10-month period of sustained expansion.

At 48.1 in January, down sharply from 53.3 in December, the headline seasonally adjusted S&P Global UK Construction Purchasing Managers’Index™ (PMI^®) – an index tracking changes in total industry activity – registered below the 50.0 no-change threshold for the first time sinceFebruary 2024.

Construction companies cited delayed decision-making by clients on major projects and general economic uncertainty had weighed on business activity at the start of 2025. A number of firms also commented on the impact of subdued market conditions in the residential building sector. Latestdata showed that house building (index at 44.9) decreased for the fourth successive month and at the fastest pace since January 2024.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “Output levels decreased across the board in January, with particularly sharp reductions seen in the residential and civil engineering categories.

“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 andhopes for a longer-term boost to supply via planning reform.

“The forward-looking survey indicators were also relatively downbeat in January. New orders decreased at the fastest pace since November 2023 amid many reports of delayed decision-making by clients. Reduced workloads, combined with concerns about the general UK economic outlook, led to a dip in business activity expectations to the lowest for 15 months.”

Sub-contractor charges increased at an accelerated pace in January, with the rate of inflation hitting a 21-month high. This was despite areduction in sub-contractor usage for the fifth time in the past six months.

Finally, around 38% of the survey panel predict a rise in business activity over the year ahead, while only 17% forecast a reduction.