IN Brief:
- The UK Construction PMI increased from 38.4 in June to 44.7 in July, remaining below the 50 growth threshold.
- Commercial construction was the most resilient category, while civil engineering recorded the steepest contraction.
- New orders, employment, confidence, supplier performance, and input-cost pressure all improved without returning the sector to growth.
S&P Global Market Intelligence recorded a sharp easing in the UK construction downturn during July, with its purchasing managers’ index increasing to 44.7 from 38.4 in June.
The reading remained below the 50 threshold separating expansion from contraction, meaning total activity fell for another month. The improvement indicates that the rate of decline slowed substantially after the severe deterioration recorded during the second quarter.
Commercial construction was the most resilient of the three principal categories, with its activity index rising to 46.8. Housebuilding increased to 41.8 and recorded its slowest decline since October 2025.
Civil engineering remained the weakest category at 38.3, although it recovered sharply from June. All three measures therefore remained in contraction territory despite the month-to-month improvement.
Forward indicators become less negative
New work fell at the slowest rate since September 2025. Survey respondents referred to an improvement in tender opportunities across commercial development, housing, and transport infrastructure, although weak domestic conditions and geopolitical uncertainty continued to affect client decisions.
The new-orders measure describes whether incoming business increased or decreased compared with the previous month; it does not record the cash value of the pipeline. A slower fall can therefore indicate improving conditions while total order books are still contracting.
Employment declined for the nineteenth consecutive month, but the rate of job losses was the weakest since February. The prolonged reduction suggests contractors remain cautious about adding fixed capacity before improved tender activity becomes signed and dependable work.
Business expectations for the coming year also reached their highest level since February. Greater confidence may support recruitment, purchasing, and investment if it persists, but the survey still records expectations from companies experiencing falling current workloads.
Tim Moore, economics director at S&P Global Market Intelligence, said: “July data suggests that the performance of the UK construction sector has started to stabilise.”
Supplier performance improved during July, while input-cost inflation eased to its lowest level for five months. Construction businesses continued to report higher fuel and raw-material costs, but the overall rate of increase moderated from the peaks recorded earlier in the year.
Cost inflation remained substantial despite the slowdown. Contractors working under fixed-price or tightly indexed contracts can face margin pressure even when the monthly rate of increase falls, because materials, fuel, labour, and subcontract costs may still be rising faster than the allowances included at tender.
The PMI is a diffusion index based on whether surveyed businesses report activity as higher, lower, or unchanged from the previous month. It provides a timely measure of direction and momentum, but it does not measure the volume or monetary value of construction completed.
That distinction explains why the July improvement can coexist with Glenigan data showing project starts well below the previous year. S17 measures projects physically entering construction during a rolling three-month period, while the PMI records monthly changes reported by a panel of construction companies.
The two indicators suggest that operating conditions became less severe without producing a broad recovery in site starts. Businesses can report a slower decline in current output and better tender opportunities while the number and value of schemes mobilising remain depressed.
Commercial construction’s relative resilience may reflect projects that were already funded or sufficiently advanced to continue. Housebuilding remains exposed to viability, demand, finance, and regulatory constraints, while civil engineering depends heavily on public programmes moving from allocation and procurement into contract award and mobilisation.
The improvement in orders is the most useful forward signal, but several stages separate a tender opportunity from construction output. Design completion, finance, planning conditions, legal agreements, procurement, and final investment approval can still delay or cancel projects before a contractor reaches site.
Subcontractors face an equally mixed position. Better availability can help main contractors resource projects and negotiate packages, but a high level of available capacity may also reflect fewer competing workloads across specialist trades.
A single month cannot establish a durable turning point, particularly after unusually weak readings. Confirmation would require further improvements in orders and activity, followed by stabilisation in employment and a sustained increase in physical project starts.
July changed the speed of the downturn rather than its direction. A PMI of 44.7 is materially stronger than 38.4, but commercial work, housing, and civil engineering were all still contracting, leaving the industry dependent on better sentiment becoming executable work.
