Despite a slight overall growth to 40.1 from the previous month, construction remains below the growth threshold for a whole year
The December 2025 construction PMI from S&P Global highlights the 12th consecutive month that the industry has been below the growth threshold of 50.0.
December also saw the second-lowest activity levels since May 2020.
Every sector suffered
While all major construction sectors saw declines, civil engineering saw the largest drop to 32.9, and housing and commercial construction saw the steepest declines to 33.5 and 42.0, respectively.
Total work also fell, as respondents said weak client confidence and delayed investment decisions following the budget kept workloads and sales pipelines down. Employment and purchasing power also declined.
Confidence improved, however, as 37% of responding firms expect output to rise throughout 2026, and just 20% expect a decline. This marks the fifth month where business optimism has remained relatively high.
Furthermore, supply chain conditions improved, with supplier delivery times improving for the fifth month running, and input cost inflation easing to its lowest level since October 2024.
“There are some encouraging signs as we head into 2026”
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies once again reported challenging business conditions and falling workloads in December, but the speed of the downturn moderated from the five-and-a-half-year record seen in November. Many firms cited subdued demand and fragile client confidence. Despite a lifting of Budget-related uncertainty, delayed spending decisions were still cited as contributing to weak sales pipelines at the close of the year.
“By sector, latest data indicated the fastest reductions in housing and commercial construction since May 2020, while civil engineering was the only segment to signal a slower pace of decline than in the previous month.
“Total new orders nonetheless decreased to a much lesser degree than in November, while business activity expectations for the year ahead rebounded to a five month high. Some survey respondents attributed greater optimism to projections of rising infrastructure spending, especially in the utilities sector. There were also hopes that lower borrowing costs and easing inflationary pressures could boost demand across the construction sector.
“Supplier performance meanwhile improved for the fifth month running, largely due to lower input buying. This also contributed to a slowdown in purchasing price inflation to its weakest since October 2024.”
Max Jones, director & head of construction at Lloyds, said: “Despite today’s figures, there are some encouraging signs as we head into 2026, including investment in major infrastructure projects which could help accelerate activity, offering a more optimistic outlook for the industry.
“Recent supply chain improvements mean firms are well placed to meet increased demand, although the sector could face renewed pressure on labour availability. While project pipelines expand, competition for specialist skills may intensify and firms that can plan for this now will be best positioned to seize opportunities for the months ahead.”
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