UK Construction Output Continues to Slide in April 2025

CONSTRUCTION ACTIVITY decreased in April 2025 for the fourth consecutive month as rising business uncertainty led to delayed decision making on new projects.

These are the latest findings from the S&P Global UK Construction Purchasing Managers’ Index (PMI^®).

Output growth projections nonetheless edged up to the highest since December 2024.

The PMI posted 46.6 in April, remaining below the 50.0 no-change value, but was up slightly from 46.4 in March and signalled the slowest decline in output levels for three months.

Residential work showed a degree of resilience in April, with the rate of contraction easing to the least marked in 2025 to date (index at 47.1). Moreover, the latest reduction in activity was the slowest seen across the three sub-categories of construction work.

Civil engineering remained the weakest-performing area of construction activity in April (43.1), with the latest survey indicating a sharp rate of decline amid a lack of new work to replace completed projects.

Commercial work (45.5) decreased for the fourth month running in April and the pace of decline accelerated to its fastest since May 2020. Construction companies widely noted that heightened business uncertainty and worries about the broader UK economic outlook had weighed on client demand.

Construction Output Continues to Slide

April data indicated a steep reduction in total new work and the pace of decline was the second-fastest since May 2020. Survey respondents typically commented on the impact of subdued business and consumer confidence.

Lower workloads resulted in the fastest decline in purchasing activity for nearly five years in April. Softer demand for construction products and materials contributed to a modest improvement in wait times for suppliers’ deliveries. Vendor performance has now improved in each of the past three months, although some firms continued to report international shipping delays.

Despite weaker demand conditions, latest data indicated another sharp increase in average cost burdens. Construction companies noted that a wide range of items had risen in price, particularly concrete products, insulation and timber, but some firms noted lower fuel costs. Many firms reported that suppliers had also sought to pass on rising payroll costs.

Staffing numbers across the construction sector meanwhile decreased for the fourth consecutive month, but the rate of job shedding eased slightly since March. Subdued demand and rising pay pressures were cited as reasons for the non-replacement of voluntary leavers.

Looking ahead, construction firms are optimistic on balance about their prospects for the next 12 months. Around 41% of the survey panel forecast a rise in output, while only 18% predict a decline. This signalled a slight improvement in business optimism to its highest since December 2024. A number of firms commented on positive expectations for residential building work, despite ongoing domestic economic headwinds and fragile client confidence.

COMMENT

Tim Moore, S&P Global Economics Director

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “UK construction companies have endured a bumpy ride since the start of the year as domestic economic headwinds and hesitancy among clients led to a lack of new work to replace completed contracts.

“Output levels continued to slide in April, but the rate of decline eased to its slowest for three months. This was helped by slower reductions in residential building work and civil engineering activity.

“Commercial construction was a weak spot and lost momentum since March. Output decreased at the fastest pace for nearly five years amid reports of greater risk aversion among clients and a wait-and-see approach to major spending decisions.

“Despite a sharp and accelerated fall in input buying, strong cost pressures persisted in April. Overall input price inflation eased only slightly from March’s 26-month peak. Survey respondents commented on rising prices paid for a range of raw materials, as well as efforts by suppliers to pass on greater payroll costs.

“An encouraging development in April was a slight improvement in business activity expectations for the year ahead. Output growth projections improved to the highest level so far this year, with a number of survey respondents citing the prospect of a turnaround in workloads across the residential building segment.”

INDUSTRY COMMENT

Pieces in Place for H2

Terry Woodley, MD of Development Finance at Shawbrook

Terry Woodley, MD of Development Finance at Shawbrook, commented: “Construction figures have continued to fall despite improved weather conditions. Areas such as residential construction have struggled to grow due to a lack of demand, likely due to wider economic concerns which have dampened confidence across the board.

“Still, the Government’s efforts over the past few months to ‘get Britain building’ have been notable and could help instill confidence in the coming months. This includes reforming the planning system, boosting training to address the skills shortage, and pledging £113bn of capital spending over the next five years, which have all contributed to the OBR’s predictions that housebuilding will reach a 40 year high.

“Whilst wider economic concerns are still very much present, the pieces are in place for a strong second half of the year. Property developers have already responded favourably to the additional support, with Shawbrook’s research finding that 61% of developers believe the residential market will improve this year. Looking ahead, there are still reasons to remain optimistic and developers should continue to keep their cool and plan for H2.”

Reset Rather Than Recovery

Gareth Belsham, Director of Bloom Building Consultancy

Gareth Belsham, Director of Bloom Building Consultancy, said: “This is a reset rather than a recovery. After much of the construction industry endured a miserable start to the year, April’s slightly improved data represents fragile progress.

“Yet for all the sighs of relief, we’re not even in ‘leveling off’ territory yet. Output is still falling in residential, commercial and infrastructure construction.

“But the rate of decline has eased considerably in housebuilding, with many residential developers anticipating an uptick in buyer demand later this year as falling interest rates make mortgages more affordable.

“Yet things are far less benign on the commercial property side, with the pace of decline here back up to levels last seen during the depths of the first Covid lockdown.

“New orders are becoming increasingly scarce as economic uncertainty leads many commercial developers to hover at the ‘go / no go’ threshold. As long as business sentiment remains this weak, there’s a risk that the number of paused projects will increase.

“Yet for all that, a majority of contractors are upbeat about the future, with 41% predicting that business will improve over the next 12 months – the highest level of industry optimism seen so far this year.

“That optimism is strongest amongst housebuilders, who are hoping that a combination of lower interest rates – which make it cheaper for developers to buy land and fund projects – and the Government’s long awaited easing of planning rules, could unleash a surge in residential schemes.

“Overall the glass is half full, but only just.”

Little Reason for Celebration

Atul Kariya, Head of Construction at MHA

Atul Kariya, Head of Construction and Real Estate at MHA, added: “While the economic landscape has not fundamentally shifted, the slight uptick in construction PMI in April was to be expected as the warmer weather in Spring tends to be good for the sector. Despite the minimal rise, there is little reason for celebration as PMI still remains below the 50 threshold, suggesting that there is some way to go before the industry sees a significant return to activity.

“All three subsectors continued to decline, although the residential sector saw a less steep contraction than since the beginning of the year.

“As we progress through the year, we may see an increase in PMI activity as interest rates start to fall and the backlog of Gateway 2 applications eases, however, this rise is likely to be short-lived.

“There will always be companies that thrive in any market, but in general will continue to bumble along the bottom as it grapples with the high tax environment, associated increasing costs and the uncertainty for investors caused by the tariffs.”

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