The downturn in UK construction eased during September but housebuilding remained the weakest part of the sector as borrowing costs continued to weigh on activity.
The S&P Global UK Construction PMI Total Activity Index rose from 44.3 in August to 46.1 in September, its highest reading for eight months.
However, the index remained below the 50 mark separating growth from contraction.
All three construction categories recorded softer falls in activity than during August, with commercial construction proving the most resilient.
HOUSEBUILDING REMAINS WEAKEST
The commercial construction index reached 48.5, signalling only a marginal reduction in activity and its weakest rate of contraction since May 2025.
Housebuilding remained firmly in contraction territory at 40.7 and was again the worst-performing area of the construction sector.
Survey respondents linked falling output to sluggish market conditions, geopolitical tensions and elevated borrowing costs.
There were also signs of further pressure on future activity, with total new orders declining at their fastest rate for three months.
Construction businesses reported delayed decision-making on major projects alongside pressure from rising input costs.
JOB CUTS CONTINUE
Employment across the construction sector fell again during September, with the rate of job losses accelerating to its fastest for five months.
Employment has now declined every month since January 2025, while subcontractor usage also returned to contraction during September.
Input costs continued to rise sharply, although the rate of inflation eased to a seven-month low. Fuel surcharges, higher freight costs and rising raw material prices were among the pressures reported by firms.
Business optimism about the year ahead also fell to its lowest level since May.
HOUSE BUILDING THE WEAKEST PERFORMER – AGAIN
Tim Moore, Economics Director at S&P Global Market Intelligence, says: “The downturn in UK construction output was the least marked since January. All three sub-sectors have seen a degree of stabilisation relative to the rapid declines reported in the second quarter of 2026.
“In September, commercial building work saw its smallest fall in activity since May 2025. House building was again the weakest performer as rising borrowing costs and unfavourable market conditions weighed on output.
“Softer order books, elevated inflationary pressures and concerns about rising borrowing costs were all reasons for construction companies to moderate their year ahead growth expectations during September. This led to a sharp drop in business optimism to its lowest since May.”
BUDGET PRESSURE
Richard Pike (main picture, inset), chief sales and marketing officer at Phoebus Software, says: “This is still a worrying reading for a housebuilding sector that was already under mounting pressure.
“August saw the sharpest contraction of the current downturn, so another fall would suggest that the weakness in residential construction is becoming increasingly entrenched rather than simply reflecting a difficult month.
“What makes this particularly significant is that the Government has now introduced a major attempt to stimulate demand through its Your First Home scheme.”
SUPPLY CONFIDENCE
And he adds: “The promise of a 2.5% deposit and 20% equity loan could help some first-time buyers overcome the deposit barrier but it will only translate into more homes being built if developers have the confidence to respond with new supply.
“That is the difficult part of the equation. Builders are still dealing with high borrowing costs, construction costs and a weaker market, while the latest mortgage data shows buyer demand remains subdued.
“The Budget now needs to provide greater certainty on how the Government intends to turn its demand-side support into sustained housebuilding.
“Otherwise, we risk making it easier to buy homes without doing enough to ensure there are enough of them.”
