UK Construction Industry Suffers Biggest Downturn Since Pandemic, PMI Shows

UK construction firms suffered their biggest downturn since the pandemic, with S&P Global's construction PMI dropping to 44.3 in July, the lowest since May 2020. Firms blamed subdued new business, site delays, and weak consumer confidence for the drop in activity. The findings are a concern for the Labour government, which has promised a housebuilding blitz and major investment in public infrastructure.

The UK construction sector experienced its most significant downturn since the pandemic, with S&P Global's construction purchasing managers' index (PMI) dropping to 44.3 in July, the lowest since May 2020 [1]. The sharp decline in the PMI, which measures the health of the construction industry, indicates a significant acceleration in the sector's contraction.

The UK construction PMI fell from 48.8 in June, undershooting expectations of an uptick to 49.2 in July. This marks the sharpest rate of decline in the sector since May 2020, according to S&P Global Market Intelligence Principal Economist Joe Hayes [1]. The PMI's drop below the neutral 50-point mark, which separates growth from contraction, signals a notable slowdown in construction activity.

The decline was driven by a sharp drop in residential building and an accelerated fall in civil engineering projects. Additionally, construction firms reported a lack of tender opportunities and hesitancy from customers to commit to projects. These factors, combined with broader themes of uncertainty both domestically and internationally, are expected to continue to dampen investment appetites [1].

The Labour government, which has promised a housebuilding blitz and major investment in public infrastructure, will likely face concerns due to the latest findings. The government has pledged to build 1.5 million homes over five years but has faced a slow start [2]. The S&P Global survey also showed that new projects for construction companies fell at the sharpest pace since February, and the amount of building materials purchased dropped for an eighth straight month, indicating a sustained slowdown in activity [2].

Travis Perkins, a major building materials supplier, has also felt the impact of the downturn. The company reported a 24.1% decrease in adjusted operating profit for the first half of 2025, falling to £63 million, compared to £83 million in the same period last year. The stock is currently trading around 531p, down 0.75% on the day following the earnings release [3].

Looking ahead, the UK construction sector faces an uncertain future. While there are signs of stabilization, such as increased sales in the Merchanting segment and a strengthened balance sheet, the overall demand remains subdued. The timing of a recovery in the sector is uncertain, making it challenging for firms to plan for the future [3].

References:
[1] https://www.marketscreener.com/news/uk-construction-activity-shrinks-at-worst-rate-in-over-5-years-in-july-ce7c5ed9dd88f622
[2] https://www.bloomberg.com/news/articles/2025-08-06/uk-builders-suffer-biggest-downturn-since-pandemic-pmi-shows
[3] https://www.asktraders.com/analysis/travis-perkins-shares-dip-as-h1-profits-decline-amidst-sluggish-construction-market/