UK construction output has continued to shrink as companies struggle to build at the pace required by the government’s far-reaching housing goals.
Output fell 0.3 per cent month on month in August, according to the Office for National Statistics (ONS), with the most pronounced decline in repair and maintenance.
“The underlying trends in construction are worrying,” Anna Leach, chief economist at the Institute of Directors, said.
“The sector is already contending with acute skills shortages, rising costs and long delays at the Building Safety Regulator.
“Added uncertainty over potential housing tax changes in the forthcoming Budget is further weighing on housing demand,” Leach added.
The latest Purchasing Managers Index (PMI) from S&P Global earlier this month revealed that construction output has been falling for nine months in a row, signalling a “solid rate of contraction”.
The report said business activity expectations were “subdued” at the second-lowest since December 2022 with some shred of optimism offset by “concerns about the UK economic outlook”.
Steven Mulholland, chief executive of the Construction Plant Hire Association (CPA), pointed to the fact that construction accounted for 15.2 per cent of all insolvencies in July 2025, the highest of any sector.
“With very few exceptions, when it comes to construction, infrastructure and housing, everything’s on a downward spiral,” Mulholland told City AM.
“[The industry] is feeling it now… jobs are finishing and new ones are not starting. We’ve got a real problem,” he added.
Construction ‘key to growth’
Building more houses has been front and centre of the Labour government’s economic plans, with concerns that the UK’s housing crisis is stifling growth and consumer confidence.
“Unlocking infrastructure and housing delivery is critical to the UK’s growth future,” Leach said.
She added that the upcoming Budget – likely to be a tax-raising one – must “tackle systemic barriers head-on – accelerating planning reform, strengthening skills support, alleviating cost pressures and delivering long-term stability for the industry.”
But other industry experts have raised the alarm that measures in last year’s budget, including inheritance tax reforms and higher labour taxes, have already forced firms to divert investment away from hiring and training.
“Something really needs to change,” Mulholland said. “Not to criticize industry, not to criticize government… but [we’re] trying to give them a shaking up, because we’re facing [challenges] on all fronts.”