The UK construction industry saw its sharpest downturn in more than five years in October 2025, as falling demand and ongoing uncertainty continued to weigh on project pipelines. The latest S&P Global UK Construction Purchasing Managers’ Index (PMI) showed total construction activity falling for the tenth consecutive month, with the pace of contraction accelerating across housing and civil engineering sectors.
The headline Construction PMI fell to 44.1 in October, down from 46.2 in September, marking the steepest rate of decline since May 2020 and the longest period of sustained contraction since the global financial crisis. With the index remaining below the 50.0 threshold that signals growth, the data confirms a deepening slowdown across much of the construction landscape.
Civil engineering and housing led the downturn
Civil engineering projects continued to record the weakest performance of any subsector, with an activity index of 35.4, the sharpest fall since the early months of the pandemic. Survey respondents attributed the decline to a lack of new infrastructure work to replace completed projects, with many pointing to delayed investment decisions and stalled approvals.
Residential construction also posted a substantial fall in activity, with its index reading 43.6, marking the steepest drop in eight months. Weak demand for new housing, rising financing costs, and hesitancy among developers contributed to the slowdown.
By contrast, the commercial construction sector showed greater resilience, with an index reading of 46.3, little changed from September. While still contracting, commercial activity appears to be stabilising as developers and occupiers focus on refurbishment and retrofit projects rather than large-scale new builds.
Fewer new orders and reduced staffing levels
Across the industry, new work continued to decline, reflecting subdued client confidence and ongoing delays in project starts. Many firms reported fewer tender opportunities and slower decision-making among both public and private sector clients. Political and economic uncertainty was also cited as a key factor holding back investment, particularly in large-scale infrastructure and housing projects.
As workloads continued to shrink, construction employment levels also declined. October saw the sharpest reduction in staffing numbers since August 2020, driven by the non-replacement of voluntary leavers and cost-cutting measures across the supply chain. Subcontractor usage also decreased, although at a slower rate compared to recent months.
Materials demand and costs show signs of stabilisation
The slowdown in activity led to a sharp reduction in demand for construction materials and products, with many firms scaling back purchasing volumes. This easing in demand helped to relieve pressure on supply chains, with vendor delivery times improving for the third consecutive month.
At the same time, input cost inflation eased to its lowest level in twelve months, reflecting greater price stability for key building materials and lower energy-related costs. Although costs remain elevated compared with pre-pandemic levels, the moderation in inflation offers a modest reprieve for firms navigating tighter profit margins.
A Period of Adjustment
Tim Moore, Economics Director at S&P Global Market Intelligence, said the data underlined the continuing challenges facing the industry:“UK construction companies reported another difficult month in October as the prolonged weakening of order books resulted in the fastest decline in activity for over five years. Civil engineering and residential activity saw the steepest rates of contraction, while commercial building showed some resilience. Reduced workloads were widely linked to risk aversion and delayed decision-making among clients.”
However, Moore also noted some encouraging signs: “Input cost inflation slowed to a one-year low, subcontractor availability improved, and supplier performance continued to strengthen. Although overall sentiment remains fragile, expectations for future activity edged up in October, supported by hopes of lower borrowing costs and a gradual recovery in client demand.”
Fraser Johns, Finance Director at Beard, echoed the cautious optimism: “The combination of political and economic uncertainties, coupled with fewer tender opportunities, has made this a challenging time for the sector. Yet we’re encouraged to see commercial building activity holding steady. At Beard, we’re focusing on collaboration, efficiency, and strategic planning to navigate these headwinds and position ourselves for the year ahead.”
Looking ahead: Signs of tentative optimism
Despite the current slowdown, the latest PMI survey found that business confidence for the next 12 months remains mildly positive. Around one-third of firms anticipate a rise in output during 2026, supported by expectations of lower interest rates, stabilising material costs, and potential growth in areas such as energy infrastructure and public sector investment.
While construction output remains under pressure, the gradual easing of cost inflation and improvements in supply chain performance could provide a more stable base for recovery. The data suggests that the industry is entering a period of adjustment,one focused on efficiency, risk management, and selective growth opportunities rather than rapid expansion.
The UK construction sector faces a challenging close to 2025, with activity declining across key segments and order books continuing to weaken. Yet amid the downturn, there are emerging signs of resilience and stabilisation. Lower inflation, better supplier performance, and an improved outlook for borrowing costs could help restore confidence as the sector looks to 2026.
For now, the industry’s focus remains on sustaining productivity, maintaining skilled workforces, and adapting to evolving market conditions. As the data shows, recovery may take time, but the foundations for renewed growth are beginning to form.
Read next: Future-ready IT infrastructure: The backbone of RFP success – Build in Digital
Are you a building professional? Sign up for a FREE MEMBERSHIP to upload news stories, post job vacancies, and connect with colleagues on our secure social feed.
