A combination of falling workloads and surging inflation delivered the steepest monthly decline in UK construction output since last November, according to the latest Purchasing Managers’ Index (PMI) data from S&P Global.
The index dropped to 39.7 in April, down from 45.6 in March and significantly below the 50 threshold that signals growth, extending the sector’s downturn to a 16th consecutive month of declining activity.
S&P said: “Reduced output has been seen in each month since January 2025 and the latest reading was the weakest for five months.”
The latest figures point to subdued market conditions across the industry, with contractors reporting weak client demand and a lack of replacement work as existing schemes completed. S&P noted that April saw the “sharpest decline in total new business since November 2025”.
Civil engineering recorded the steepest contraction of any subsector, with activity falling to 35.3 from 44.8 in March. Commercial construction proved relatively more resilient, although its score still slipped to 42.7 from 47.1, marking its weakest performance so far this year. Housebuilding remained under severe pressure, with the residential index unchanged at 38.2.
Inflationary pressures intensified sharply during the month. Input cost inflation rose to its highest level since June 2022, driven largely by fuel-related costs and material price increases.
S&P economics director Tim Moore said “the latest rise in purchasing costs was the steepest in three decades of data collection”. He added that around two-thirds of firms surveyed attributed the increases to costs “overwhelmingly linked to fuel surcharges and subsequent rises in raw material prices”.
The pressure on residential developers has become particularly acute. Atul Kariya, head of real estate and construction at audit and business advisory firm MHA, said housebuilders are being squeezed by rising costs throughout the supply chain “just as buyer confidence and mortgage affordability come under strain”.
Reduced workloads also triggered a “sharp and accelerated” fall in purchasing activity across the sector, while weaker order books contributed to what S&P described as a “sustained downturn” in staffing levels.
The report highlighted broader geopolitical and economic uncertainty as another factor weighing on the market. It said “elevated business uncertainty” linked to the conflict in the Middle East has extended sales conversion times and reduced tender opportunities.
Richard Green, construction partner at law firm Gowling WLG, described the latest PMI data as evidence of a “deteriorating picture” for the industry.
“Developers are delaying starts, public sector programmes remain slow to progress, and contractors are increasingly cautious about taking on risk without greater price and programme certainty,” he said.
“We are seeing earlier engagement on contract risk allocation, value engineering and exit protections, alongside a rise in distress indicators further down the supply chain.”
Kariya added that escalating build costs and uncertainty surrounding future interest rate movements are contributing to delays in project launches and investment decisions.
“As a result, there is a growing risk that decisions will be postponed until pricing and borrowing costs stabilise,” he said.
Despite the negative backdrop, some parts of the sector continue to demonstrate resilience. Paul Atkinson, restructuring partner at business advisory firm FRP, said “pockets of resilience” remain visible, although he warned that mounting pressure on housebuilders is becoming increasingly difficult to ignore.
He said contractors must remain “proactive and decisive” in managing current market conditions if they are to benefit once confidence begins to recover.
Huda As’ad, UK capital projects and infrastructure lead at Accenture, said the industry has reached a “pivotal moment”, warning that delays between project pipelines and delivery are becoming increasingly damaging.
Without faster execution and clearer movement from pipeline to delivery, she said, “the risk is that momentum slips further”.
As’ad and Brian Smith, head of cost management at Aecom, both argued that firms embracing AI and digital technologies to improve efficiency will be better placed to withstand ongoing market turbulence and emerge stronger when conditions improve.
