Faster Decline in Housing Activity Weighs on Construction Sector Output

After showing some signs of resilience at the start of 2026, the UK construction sector recorded an accelerated downturn in output levels in February.

The seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index™ (PMI^®) registered 44.5 in February, down from January’s seven-month high (46.4) and indicative of a solid reduction in overall business activity.

The survey mostly cited weak order books and a lack of new project starts. Several firms also noted that exceptionally wet weather had delayed some work on site in February.

Housing

Residential building remained the weakest-performing segment in February (index at 37.0) and the rate of decline accelerated since January.

Commercial

Commercial construction activity (46.5) also decreased at a faster pace than at the beginning of the year, but the speed of the downturn was much less marked than seen across the rest of the construction sector.

Civil Engineering

Civil engineering was the only sub-sector to record a slower fall in activity levels during February. Although still sharp, the latest index reading (41.0) pointed to the slowest rate of contraction since September 2025.

New Work

February data pointed to a sharp and accelerated decline in total new work across the construction sector. Lower volumes of new business have been recorded in each month since January 2025. The latest decline was mainly linked to sluggish demand conditions, although there were some reports of a turnaround in tender opportunities for infrastructure and energy sector work.

Business Sentiment

Business activity expectations meanwhile improved to the highest since December 2024. Around 42% of the survey panel forecast a rise in output levels during the year ahead, while only 12% anticipate a decline. This was attributed to expected new contract wins on major projects and hopes of a broader turnaround in demand conditions. However, many firms also commented on heightened political and economic uncertainty.

Employment

Improving business expectations appeared to support employment numbers in February. Overall staffing levels were close to stabilisation, which contrasted with steep job losses at the end of last year.

Purchasing

Purchasing activity continued to fall sharply in February, with the rate of decline slightly steeper than at the start of 2026. Weaker demand for construction products and materials contributed to a sustained improvement in supplier performance. Lead times have now shortened for seven consecutive months.

Input Prices

Construction companies again faced pressure on their margins from sharply rising input costs. February data signalled the steepest rise in average cost burdens since July 2025. Many firms noted higher prices paid for items such as concrete, copper, insulation and steel.

COMMENT

Tim Moore, Economics Director at S&P Global

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “A sharper downturn in house building was the main factor behind the setback for UK construction activity in February, following some signs of stabilisation at the start of 2026. Total industry activity has decreased in each month since January 2025 and the latest decline was faster than seen on average over this period. The reduction in output was largely due to sluggish demand conditions, but some firms also noted that exceptionally wet weather had disrupted construction projects.

“Construction companies were hopeful of a turnaround in business activity over the year ahead, with optimism levels hitting a 14-month high in February. This was often linked to forthcoming new projects in the infrastructure and energy sectors, as well as projected improvements in broader economic conditions.

“Sharply rising input costs were a challenge in February. The rate of purchasing price inflation hit a seven-month high as suppliers passed on rising raw material costs, especially metals.”

Atul Kariya, Head of Construction at MHA

Atul Kariya, Head of Real Estate and Construction at MHA, comments: “The latest construction PMI figures underline the difficult reality the industry continues to face. After an extended period of operating in uniquely difficult circumstances, many businesses still remain vulnerable to external shocks. Current global instability and ongoing conflicts will put further pressure on already challenging supply chain issues, exacerbate energy and materials cost inflation and generally weaken overall confidence.

“The Spring Statement earlier this week offered an opportunity for the Government to prioritise long-term economic growth, but expectations were limited. The industry urgently needs clear, sustained measures that stimulate economic activity, support investment and help rebuild resilience across the sector.

“With unemployment trends likely to influence housing transactions, we may see a knock-on effect on demand in the months ahead. A PMI reading that remains below the 50-mark is undoubtedly discouraging, but the hope is for gradual stabilisation as the year progresses. The sector is flat bar a couple of areas,  but with the right growth levers and a forward looking policy environment, improvement is still possible.”

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