UK Construction Output Falls at Fastest Pace for Six Years

Shrinking order books and rising economic uncertainty contributed to another steep decline in UK construction activity during May.

At the same time, higher energy, fuel and transportation costs led to the fastest pace of input price inflation since June 2022.

At 38.2 in May, down from 39.7 in April, the headline seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) posted below the neutral 50.0 threshold for the seventeenth month running. Moreover, the rate of contraction was the steepest since May 2020. Aside from the drop in construction output at the start of the pandemic, the latest fall was the fastest since March 2009.

Residential

All three broad categories of construction work posted sharp declines in output levels during May. Residential activity (index at 36.0) was the weakest-performing segment, with survey respondents commenting on unfavourable market conditions and headwinds from elevated borrowing costs.

Commercial

Commercial construction (39.0) also saw a steeper reduction in output levels in May, reflecting risk aversion among clients in response to geopolitical tensions and rising inflationary pressures. Meanwhile, civil engineering work fell at a slightly less marked rate than in April (36.2).

New Orders

Total new orders across the construction sector decreased at a sharp and accelerated pace in May. Mirroring the trend for output levels, the downturn in new business intakes was the fastest for six years.

Construction companies suggested that project delays, deferred investment decisions and general cutbacks to clients’ budgets had all resulted in fewer tender opportunities. Some firms suggested that domestic political uncertainty had also impacted demand conditions in May. However, there were reports that forthcoming energy sector and power networks projects were a bright spot for new infrastructure work.

A lack of new orders to replace completed projects resulted in lower employment numbers and another sharp drop in input buying during May. The latest fall in purchasing activity was the fastest since November 2025.

Despite weaker demand for construction products and materials, the latest survey indicated that suppliers’ delivery times lengthened for the third month running in May. Moreover, the downturn in vendor performance was the sharpest since December 2022 amid widespread reports of international shipping delays and some raw material shortages.

Input Prices

Almost two-thirds of the survey panel signalled a rise in their input prices during May, while only 1% experienced a decline. The resulting seasonally adjusted Input Prices Index pointed to the fastest pace of inflation since June 2022.

Higher purchasing prices were mostly linked to fuel surcharges, rising energy costs and higher transportation bills. Moreover, subcontractor charges increased to the greatest extent for nearly three-and-a-half years.

Outlook

Business activity expectations for the next 12 months remained positive in May, but the degree of optimism eased to the second-lowest since December 2022. Around 31% of the survey panel predict a rise in output levels during the year ahead, while 25% forecast a reduction.

Subdued business confidence was generally attributed to concerns about the impact of rising inflation, as well as elevated borrowing costs and unfavourable near-term projections for domestic economic conditions.

COMMENT

Tim Moore, Economics Director at S&P Global

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “UK construction companies reported a steep downturn in business activity during May, with the speed of contraction accelerating to its fastest for six years. House building remained especially subdued, and there were fresh challenges in the construction sector from a considerable softening of commercial activity since April.

“Anecdotal evidence suggested that economic uncertainty and rising inflation in the wake of the Middle East conflict had triggered the steepest drop in new work since the beginning of the pandemic. Elevated borrowing costs were also reported to have impacted market conditions.

“Fuel surcharges and rapid increases in prices for energy-intensive raw materials continued to be felt across the construction supply chain. Overall purchasing costs rose to the greatest extent since June 2022, while international shipping delays meant that suppliers’ delivery times lengthened for the third month running.

“Concerns about a prolonged decline in construction order books, alongside unfavourable near-term UK economic prospects, weighed on business optimism in May. This index has fallen sharply since the start of 2026, and confidence levels are now almost as low as those seen ahead of last autumn’s Budget.”

INDUSTRY COMMENT

Still No Light at the End of the Tunnel

Joe Sullivan, Partner at MHA

Joe Sullivan, Partner at MHA, commented: “Today’s construction PMI were worse than feared and point to a sector that remains under significant pressure, as construction activity continues its downward trajectory.

“Activity is still firmly in contraction territory, and there doesn’t seem to be any light at the end of the tunnel for the industry. Across the market, the issue is less about capacity and more about confidence, with clients continuing to delay projects and push decisions further down the line which given the UK and global economic uncertainty is hardly surprising. Order books continue to dwindle and while some may exist on paper, many schemes are not progressing at the pace businesses need.

“Housebuilding remains one of the weakest parts of the sector, as affordability pressures, weaker buyer confidence and subdued demand continue to weigh on activity. Larger developers are likely to keep scaling back in response to market conditions, while smaller firms may face even tougher decisions as they balance reduced selling prices against the need to service debt.

“Commercial construction is also subdued, with many projects effectively on pause as uncertainty continues to affect investment decisions. By contrast, infrastructure work is holding up better, offering some resilience in an otherwise fragile market but activity still remains weak.

“Cost pressures have not returned to the extreme levels seen during the pandemic, but the demand is more limited and volatility in input costs still poses a real risk, particularly for firms operating on fixed-price contracts.

“At the same time, labour remains a concern. In an uncertain market, many businesses will be reluctant to replace workers as they leave, but that creates a longer-term challenge if activity picks up and skills are harder to find. Overall, the sector remains in a difficult position, and unless confidence improves materially, these pressures are likely to persist for some time yet.”

Concerning Backdrop

Dr David Crosthwaite, BCIS Chief Economist

Dr David Crosthwaite, Chief Economist at BCIS, said: “The combination of weakening demand and accelerating cost pressures indicated in the latest PMI reading presents a particularly concerning backdrop for the construction sector.

“Normally, falling workloads and a shrinking pipeline of new work would help ease pressure on prices. Instead, contractors are facing rising input costs driven by energy, fuel and transport pressures, alongside ongoing supply chain disruption.

“This is reflected too in BCIS data; our DERV (diesel engined road vehicle) fuel index was 38% higher in April 2026 than a year earlier, adding further pressure to plant operation, distribution and wider construction logistics costs.

“It is perhaps unsurprising that housing and commercial construction are seeing some of the sharpest declines in activity. These are among the most economically sensitive areas of the market and are often the first to respond to uncertainty around borrowing costs, investment decisions and future demand.

“While the government cannot be held responsible for the current geopolitical tensions or rising global energy costs, the latest figures underline the scale of the challenge facing the sector.

“Construction activity continues to weaken despite a stated commitment to increasing housebuilding and supporting economic growth.

“The question increasingly becomes where the impetus for recovery will come from, and whether current interventions are sufficient to restore confidence and unlock investment.

“Against that backdrop, the prospect of further cost pressures from steel tariffs coming into effect in July risks adding another layer of uncertainty to a market that is already struggling to find momentum.”

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