Latest construction activity from firms survey

Housebuilding contraction drove steeper fall in construction activity in August

UK construction activity declined for the twentieth consecutive month in August 2026, 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, dropped to 44.3 in August from 44.7 in the previous month. A reading above 50 indicates growth in activity, while a reading below 50 signals contraction.

Weak residential activity was the main factor behind the sharper decline in overall construction activity in August. Survey respondents frequently cited subdued demand and fewer new project starts, particularly in housebuilding. New orders also continued to fall, although the rate of contraction eased to its slowest since September 2025.

Dr David Crosthwaite, chief economist at BCIS, said: ‘It is important to focus on the longer-term trends rather than individual months. The headline takeaway is that construction activity has now been in continuous decline for 20 months. There have been more positive signals from individual sectors during that period, but no sustained sign of recovery.

‘While we should not read too much into a single month, the sharp fall in residential activity reflects a difficult combination of high development costs, subdued demand and weaker investment confidence all impacting scheme viability. Infrastructure activity also appears to be below the level that might be expected given the government’s planned spending ambitions.

‘The Autumn Budget may provide greater clarity. Measures that address concerns about the wider economy and the economic impact of the US-Iran war would be welcome.’

At a sector level, all three main categories recorded a reduction in activity in August. Residential was the only category where the rate of contraction accelerated compared with July, with its index falling to 37.6 from 41.8.

Commercial activity was the most resilient of the three categories, with its index rising to 47.8, although it remained below the 50.0 threshold for growth. Civil engineering recorded its slowest rate of contraction since March, at 40.5, with some firms reporting an improvement in infrastructure work.

Survey respondents frequently cited greater risk aversion following the Middle East conflict and delays in client decision making. Employment continued to fall, with firms also reporting a lack of new business to replace completed work alongside strong cost pressures.

However, the rate of job losses was modest and the slowest since February. Subcontractor usage increased for the first time in just under two years, while the rate of increase in subcontractor charges was the slowest since March.

Input cost inflation also eased, with the rate of increase falling to a six-month low.

Looking ahead, construction firms remained optimistic about activity over the coming year, although confidence weakened compared with July. Around 38% of respondents expected output to increase over the next 12 months, compared with 20% anticipating a decline.

Geopolitical conflict, domestic economic uncertainty and subdued client confidence were reported as the main factors weighing on expectations.

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