What happened
The UK construction sector registered its 22nd consecutive month of declining activity in October, according to S&P Global’s UK Construction Purchasing Managers’ Index (PMI). The latest figure for the PMI was 43.6 in October. Numbers below 50 indicate a fall in activity compared with the previous month. The October drop was the largest since June 2026.
According to S&P Global, housing construction was the weakest performing segment with a PMI score of 35.1. This is the lowest figure recorded for housing in 2026. Civil engineering and commercial activity both also saw contraction, recording scores of 45.9 and 46.3 respectively. New project starts fell at their fastest rate in four months.
Tim Moore, economics director at S&P Global Market Intelligence, attributed the overall weakness to continuing pressures in housebuilding, including higher borrowing costs and uncertainty in the economy. Moore said manufacturers continued to face delays with material deliveries and saw input cost inflation accelerate, mainly due to higher fuel and energy prices.
Despite this, Moore noted demand remained strong for some specialist construction, such as data centres, as well as increasing workloads in energy and utilities. Infrastructure spending also helped slow the decline in civil engineering.
The background
The downturn in construction has now lasted since December 2024. The sector has seen no month of growth since then. Construction companies have attributed weaker output to uncertain economic conditions, falls in consumer confidence, and higher financing costs.
Glenigan, a construction intelligence group, also reported a fall in underlying construction work starting on site. The value of starts in the quarter to 31 October 2026 was down 20% compared to the same period in 2025, at £12.9bn. Glenigan’s measure excludes schemes worth over £100m. The data found that residential work was hit hardest, with a drop of 29% in the number of starts year-on-year. Non-residential building work saw a decline of 22%. However, there was a 19% rise in underlying civil engineering activity in the same period, Glenigan said.
S&P Global’s Moore described the October data as a “setback” after some early signs of stabilisation earlier in the year. He said that pressures in the housebuilding sector remained severe and that companies faced difficulties with delivery delays and price increases for materials, especially fuel and energy.
What people are saying
Tim Moore at S&P Global pointed to what he described as "severe headwinds" in housebuilding, citing borrowing costs, low confidence, and uncertainty as key issues. He noted that price inflation for inputs had increased, due mainly to higher fuel surcharges and energy bills, but said there was still "strong demand" for data centre projects and higher workloads in energy and utilities.
Moore said that, faced with higher input costs, borrowing costs and smaller order books, construction firms are "cautious about the year-ahead business outlook". He said business optimism fell again in October and is now close to its lowest level since late 2022.
Kelly Boorman, national head of construction at the tax consultancy RSM UK, said the figures showed a continued downturn in sentiment. According to Boorman, higher costs and stalled house prices were "squeezing margins and driving site viability concerns". She called for clarity from government on when support for housing would be introduced and a clear pipeline for major civil engineering projects.
Boorman warned that the industry should brace for a "suppressed first half of 2027" while government stimulus arrives and wider economic pressures continue to affect buyers and investors.
Brian Smith, head of cost management at Aecom, said construction firms faced "a difficult winter". Smith said there was hope for more resilient firms in the long term, citing government efforts to reduce red tape and planning delays. He pointed to the upcoming 10-year plan as a possible turning point, suggesting it could stimulate investment and help return the sector to growth.
Glenigan’s economic director Allan Wilen said the industry had reason to be "frustrated". He said that, despite recent changes in government policy, construction starts had continued to decline during the last quarterly period measured.
What happens next
The data suggest that workloads are likely to stay suppressed until confidence returns and government stimulus measures are confirmed. Kelly Boorman at RSM UK said the sector was looking for more information on when funding would become available for housing and a defined schedule for civil engineering projects. Brian Smith at Aecom said contractors and clients would be more able to plan and invest if the expected 10-year plan establishes a predictable pipeline of work.
Civil engineering may continue to provide some support to overall sector activity due to infrastructure spending, according to Glenigan and S&P Global. However, most outlooks suggest that housing, and to a lesser extent commercial building, will continue to face downward pressure from market conditions and costs.
Industry leaders have called on the government to provide clarity on spending plans and to take action to reduce uncertainty and speed up processes such as planning. The sector is expected to remain cautious in its outlook into 2027, while awaiting further details of government measures and outcomes of wider economic changes.