PMI Signals Weakest Business Confidence in Over Two Years as Construction Output Falls Again

Construction output in the UK has now declined for eight months in a row. The latest Construction PMI highlights that housing and civil engineering remain the biggest drags on performance, while industry confidence has slipped to its weakest point in more than two years.

The headline PMI score for August came in at 45.5, up slightly from July’s 44.3 but still signalling contraction. A reading below 50 indicates decline. Housing activity slipped to 44.2, while civil engineering fell to just 38.1 — the sharpest drop since October 2020. New orders also declined for the eighth successive month, though the rate of fall eased compared to earlier in the year.

Tim Moore, economics director at S&P Global Market Intelligence, noted that “elevated business uncertainty and worries about broader prospects for the UK economy” are continuing to weigh on outlook. Only 34% of surveyed firms expect growth over the next year, with 22% anticipating further contraction — the lowest level of confidence since December 2022.

Gareth Belsham, director at Bloom Building Consultancy, warned that “things have gone from bad to worse for housebuilders,” with residential output falling at its fastest pace since February. He added that thinning order books are a growing concern, even for large contractors.

Despite the ongoing downturn, there are some signs of support. The recent Bank of England base rate cut may ease pressure on debt-laden contractors and improve access to development finance. Commercial construction has also shown greater stability compared to housing and civil engineering, providing a small measure of resilience within the sector.