June Continues Reduced Construction Activity Trend

CONSTRUCTION companies indicated a marginal reduction in total business activity during June, despite a return to growth in residential building work.

However, new orders decreased at an accelerated pace. This contributed to the weakest degree of business optimism across the construction sector for two-and-a-half years.

At 48.8 in June 2025, the headline S&P Global UK Construction Purchasing Managers’ Index™ (PMI^®) – a seasonally adjusted index tracking changes in total industry activity – was up from 47.9 in May and signalled the slowest decline in construction output since the current period of contraction began in January.

Any reading below 50.0 indicates an overall reduction in construction activity. The marginal decline in construction output during June reflected accelerated rates of contraction in the commercial and civil engineering segments.

Commercial work decreased at the fastest pace since May 2020 (index at 45.1), which survey respondents attributed to subdued UK economic conditions and cutbacks to investment spending among clients.

Civil engineering (44.2) fell for the sixth month running and was the weakest-performing area of construction activity.

House building was the only category of construction work to expand in June (50.7). Higher levels of residential activity were recorded for the first time since September 2024, although the rate of growth was only marginal. Some firms commented on an upturn in new projects and sales pipelines.

New order books across the construction sector as a whole deteriorated for the sixth successive month in June, with the rate of decline accelerating since May. Survey respondents commented on fewer tender opportunities and intense competition for new work, reflecting weak overall demand conditions and heightened risk aversion among clients.

Mirroring the trend for new work, latest data indicated a sustained downturn in staffing numbers. Construction companies have recorded cutbacks to employment throughout the year to date. This was again linked to low lower demand and efforts to reduce overheads. Demand for construction items softened again in June.

COMMENT

Tim Moore, Economics Director at S&P Global

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “June data highlighted a sustained downturn in UK construction output, albeit at the slowest pace in six months.

“Shrinking workloads in the commercial and civil engineering segments weighed on total industry activity. Commercial activity fell at the sharpest rate in just over five years.

“On a brighter note, house building was the best performing area of the construction sector. Higher levels of residential work were recorded for the first time since September 2024 amid some reports of more stable demand conditions.

“The forward-looking survey indicators were weaker than in May. Total new orders fell at a faster pace as many construction companies signalled reduced overall workloads due to unfavourable domestic economic conditions and fragile confidence among clients.

“At the same time, business activity expectations dipped to a two-and-a-half-year low in June. Survey respondents widely cited fewer tender opportunities, rising competition for new work and a projected headwind from subdued business investment during the year ahead.”

INDUSTRY COMMENT

Warning Lights

Gareth Belsham, Director of Bloom Building Consultancy

Gareth Belsham, Director of Bloom Building Consultancy, commented: “Even the most optimistic of builders would struggle to declare the glass half full.

“Yes the overall contraction in industry workloads continues to ease, and housebuilders even saw output rise in June. That’s the good news.

“But on the other side of the ledger, commercial sector workloads fell sharply, declining at their fastest level since May 2020 – a month when Britain was in the teeth of the Covid pandemic. Infrastructure and civil engineering work contracted even more rapidly.

“But the real cause for alarm is the continued decline in new orders – as they are the key to where the industry goes from here. Builders’ order books have got progressively thinner every single month in 2025 so far, and this is taking a severe toll on construction industry sentiment.

“As the ultimate bellwether of broader business sentiment, the fall in demand for construction is another economic warning light for the Chancellor to take notice of.

“In this challenging market, the projects that do get greenlit are laser-focused on value and a fully costed business case – there is minimal margin for error.”

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