UK construction activity fell sharply in January, ending a 10-month streak of expansion as higher borrowing costs, gloomy economic prospects and weak client confidence hit the sector.
S&P Global’s UK Construction Purchasing Managers Index fell to 48.1 last month, down from 53.3 in December and well below the 53.4 expected by analysts.
“The overall construction PMI reading falling into negative territory for the first time in nearly a year is not unexpected – accelerating cost inflation, weaker economic conditions, and higher borrowing costs have slowed the sector’s recovery,” said Jordan Smith, technical director at property consultancy Thomas & Adamson.
“Despite policy support for the likes of housebuilding and civil infrastructure, these are seeing some of the weakest levels of activity on the ground,” he added.
Output levels decreased across the board in construction, but particularly deep falls were recorded in the residential and civil engineering sectors.
House building activity fell for the fourth month, registering a 44.9 in S&P’s survey, its worst decline in a year.
Meanwhile, reduced workloads, combined with concerns about the economic outlook of the UK as a whole, led to a fall in business activity expectations to its lowest for 15 months.
New orders also decreased at the fastest pace since November 2023, with S&P’s report noting that many construction firms reported delayed decision-making from clients.
Price inflation also hit confidence, with purchase price inflation rising to its highest since April 2023 as suppliers looked to pass on rising energy and wage costs.
“We expect to see further detail about the government’s spending plans in the coming months and would hope that this will provide much-needed stimulus to the sector – particularly areas that have struggled recently,” added Smith.
“It is also worth noting that, on balance, more firms continue to predict a rise in activity during 2025 than a fall.”