The UK construction sector suffered its sharpest downturn since the early days of the Covid pandemic, as housebuilding activity collapsed in July.
According to the latest S&P Global Market Intelligence survey, construction output fell fastest since May 2020. The sector’s purchasing managers index (PMI) dropped from 48.8 in June to 44.3 in July, well below the 50.0 mark that separates growth from contraction.
Housebuilding was the biggest drag, with its sub-index falling from 50.7 to 45.3. Civil engineering also recorded a steep fall, while commercial construction slowed modestly.
The data, drawn from around 150 firms, is closely watched by the Treasury and the Bank of England for signs of economic health. It comes amid a grim outlook: unemployment is rising, inflation remains sticky, economic output shrank in April and May, and global trade faces new disruption from Donald Trump’s latest tariffs, which started this week.
The figures raise doubts over Labour’s ambition to deliver 1.5 million new homes by the end of the current Parliament. Industry voices have questioned the target’s realism, pointing to overstated assumptions about building capacity.
While the Government offers £39 billion for social housing and planning reforms to support development, analysts highlight significant obstacles, including labour shortages, inflation, and April’s rise in employer NICs.
Despite these headwinds, ministers are hoping for a rebound. Following yesterday’s Bank of England rate cut to 4%, markets now expect at least one more cut by the end of 2026 – a move that could further alleviate financial pressures on households and businesses.
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