Latest construction activity from firms survey

Construction downturn eases sharply as PMI hits four-month high

UK construction activity declined for the nineteenth consecutive month in July 2026, although the pace of decline eased markedly compared with June, according to the latest S&P Global UK Construction Purchasing Managers’ Index (PMI)⁽¹⁾.

The PMI, which tracks changes in the volume of business activity through a monthly survey of around 150 construction firms, climbed to 44.7 in July from 38.4 the previous month, its best score in four months, though still short of the neutral 50.0 mark. A reading above 50 indicates growth in activity, while a reading below 50 signals contraction.

New business volumes fell again in July, but at a much slower rate than at any point in the past ten months. Firms flagged a pick-up in tender opportunities across commercial development, housing and transport schemes, even as ongoing geopolitical tensions and a sluggish domestic economy continued to constrain client demand.

Dr David Crosthwaite, chief economist at BCIS, said: ‘This is the most encouraging set of construction figures we’ve seen in months, but it would be wrong to call it a turning point. The sector has now been in continuous decline since January 2025, the longest unbroken downturn since the global financial crisis, and one better month doesn’t undo that underlying trend.

‘Civil engineering is still the weakest performing among the three main categories, and while its improvement from June’s low is welcome, the sector remains firmly in contraction. Given the scale of infrastructure investment committed in the government’s pipeline, the gap between planned spending and activity on the ground clearly hasn’t closed. There’s also still no clarity on how the government’s defence spending commitments will be funded, or which parts of the existing infrastructure programme might be scaled back or deferred as a result. All of construction faces ongoing uncertainty until the new Chancellor sets out his spending and growth plans in the Autumn Budget at the end of October.

‘Easing input costs and a lift in business confidence are welcome developments. But firms remain cautious, and until new orders turn positive, rather than simply falling more slowly, this looks more like the downturn losing momentum than a genuine recovery.’

At a sector level, all three main categories saw a much shallower rate of contraction in July. Commercial work was the most resilient, with its index climbing to 46.8. Civil engineering continued to underperform the other two categories, but recovered sharply, rising to 38.3 from June’s 22.1 – a figure that had marked the sector’s lowest reading since construction sites shut down during the 2020 pandemic. Housebuilding, meanwhile, posted its smallest monthly fall since October 2025, with an index of 41.8, up from 35.9 in June.

Looking ahead, construction firms turned more upbeat in July, with optimism reaching its highest level since February. Around 38% of respondents now expect expansion over the coming year, against 17% anticipating a decline. Firms pointed to hopes of better domestic economic conditions and better prospects for winning infrastructure work as reasons for the improved outlook.

Job losses slowed to their weakest pace since February. Rather than actively cutting staff, firms have reportedly responded to the lack of work by simply not replacing employees who left voluntarily. Meanwhile, the pool of available subcontractors grew at its fastest rate since April 2025.

Cost pressures also continued to unwind in July: input price inflation slowed to its lowest level since February, extending the retreat from the near four-year peak recorded in May. Where costs did rise, firms mostly pointed to fuel surcharges and pricier raw materials. Respondents also reported fewer instances of transportation delays.

Dr David Crosthwaite added: ‘We continue to keep an eye on events in the Middle East, which remain volatile. Brent crude, an international benchmark of oil prices, peaked over $100 a barrel at the end of July, the first time it’s done so since May, and it appears contractors are absorbing much of that cost pressure themselves rather than passing it on, given how weak demand still is. The longer the conflict continues, the more of that pressure will end up being pushed through the supply chain.’

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^{(1) S&P Global UK Construction PMI  - here}