The pace of contraction across the UK construction sector slowed in July, with activity declining at its weakest rate in four months as new orders, purchasing activity and business confidence all showed signs of improvement.
The latest S&P Global UK Construction Purchasing Managers’ Index (PMI) rose to 44.7 in July, up from 38.4 in June and its highest reading since March. Although the index remained below the 50.0 threshold that separates growth from contraction, it suggests the sector is beginning to stabilise after an extended period of weakness.
July marked the longest continuous period of contraction for the construction industry since the global financial crisis, but all three main sectors recorded slower rates of decline than in the previous month.
Commercial construction proved the most resilient, posting a reading of 46.8, while civil engineering remained the weakest-performing sector with an index of 38.3. Housebuilding also continued to contract, although the pace of decline eased to its slowest level since October 2025, with a reading of 41.8.
New orders fell for a tenth consecutive month, but the rate of decline was the slowest recorded during that period. Survey respondents reported an improvement in tender opportunities across commercial development, residential construction and transport infrastructure schemes, suggesting that parts of the market are beginning to regain momentum.
Paul Atkinson, restructuring partner at FRP Advisory, said: “It seems the sector is beginning to find firmer footing after prolonged uncertainty.
“While the sector has some way to go before entering expansion, businesses are becoming much better at managing the challenging operating environment, with supply chains proving more resilient and cost pressures easing compared with previous years.”
Max Jones, director and head of construction at Lloyds, said demand for infrastructure projects continued to provide support for parts of the industry despite the broader slowdown.
He stated: “Demand for major infrastructure and civil engineering work remains healthy, supported by investment in areas such as regulated utilities, defence and transport.
“Many firms are continuing to look for opportunities to grow, leaving the sector well placed to benefit as the government’s renewed focus on transport and infrastructure investment takes shape.”
The survey also indicated improving conditions across the supply chain. Purchasing activity declined at its slowest rate since September 2025, while reduced demand for construction products and fewer transport delays helped suppliers improve delivery performance for the first time in five months.
Cost pressures also moderated during July. Input price inflation eased to its lowest level for five months, having reached a near four-year high in May. Companies that continued to report rising costs cited fuel surcharges and higher raw material prices as the main drivers.
Despite activity remaining in contraction territory, sentiment for the year ahead strengthened. Around 38% of survey respondents expect business activity to increase over the next 12 months, while 17% anticipate a decline, making July the strongest month for business optimism since February.
Jones commented: “A further improvement this month suggests confidence is rising across the sector. Businesses continue to invest and plan for growth, supported by some improvements in economic conditions. While project funding is largely in place, the scale and complexity of planned works mean that momentum is expected to build steadily over time.”
Atkinson added: “It seems the sector is beginning to find firmer footing after prolonged uncertainty. While the sector has some way to go before entering expansion, businesses are becoming much better at managing the challenging operating environment, with supply chains proving more resilient and cost pressures easing compared with previous years.”
