IN Brief:
- S&P Global UK Construction PMI rose to 46.4 in January, from 40.1.
- Output still contracted, but the pace of decline eased sharply.
- Business expectations improved, while housing activity continued to lag.
January brought a noticeable change of pace for UK construction, with survey data indicating the sector is still shrinking but no longer in freefall. The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) rose to 46.4 in January, up from 40.1 in December. Any reading below 50.0 signals contraction, so the improvement does not amount to a return to growth, but it does mark a materially softer decline than the sector recorded through the end of 2025.
That shift matters operationally because it tends to show up first in site decision-making: fewer projects paused mid-stream, fewer scope reductions, and a slightly less defensive posture on procurement and resourcing. Survey respondents reported that client appetite for committing to work had improved versus late 2025, and that the slide in workloads was less widespread. At the same time, housing activity remained the weakest area, consistent with affordability constraints and a market still sensitive to borrowing costs.
Forward-looking indicators were firmer. Businesses reported the highest level of optimism since May 2025, with expectations supported by improving investment sentiment and a steadier flow of enquiries compared with the prior quarter. Employment conditions, while still under pressure, also showed signs of stabilisation, with the pace of job cuts easing from the lows seen at year end. For contractors and supply chains, that combination typically points to a market that is still searching for the floor, rather than one preparing for a rapid rebound.
The PMI picture also lands against a soft official output backdrop. ONS data show monthly construction output fell by 1.3% in November 2025, following a downwardly revised 1.2% fall in October 2025, with both new work and repair and maintenance declining. The ONS noted industry feedback pointing to delays and cautious customer spending linked to economic uncertainty ahead of the autumn budget announcement — a context that helps explain why sentiment can improve even while delivered output remains weak.
The near-term outlook, then, remains mixed. The January PMI suggests a sector that has started 2026 with less severe declines, and with a stronger belief that pipelines can be rebuilt over the coming year. House building continues to be the drag, and until that segment shifts decisively, the broader market is likely to remain dependent on non-residential work, infrastructure programmes, and refurbishment activity to keep utilisation stable.
