UK construction ‘exits tailspin’ but job losses persist as housebuilding slumps
The UK’s struggling construction sector showed signs it was turning a corner at the beginning of the year even as job losses and shrinking order books persisted.
The latest construction Purchasing Manager’s Index (PMI) from S&P Global – which serves as a headline index tracking industry activity – edged up to 46.4, up from 40.1 in December but still remained well-below the 50.0 threshold to indicate whether a sector is growing.
The figures marked the slowest reduction in construction activity in the last seven months with job losses moderating but still persisting.
S&P said the latest data signalled a “solid reduction in staffing numbers”, extending the period of continuous job losses to 13 months.
House-building took the spot as the weakest-performing segment, with a struggling reading of 39.3. A lack of new residential development projects and subdued demand conditions were cited as key drivers of the downturn.
The ailing conditions in the segment come despite a push from Chancellor Rachel Reeves and housing secretary Steve Reed to “build baby, build” with new plans to construct 125,000 new homes through the government’s intervention programme to “kickstart” construction.
Construction expectations rebound
“Construction companies noted subdued underlying demand due to fragile client confidence and elevated risk aversion, but there were some reports of improving investment sentiment and greater sales enquiries at the start of the year,” Tim Moore, economics director at S&P Global Market
Intelligence, said.
Moore added the data showed the sector had “exited its tailspin” with firms becoming “more hopeful”.
Business activity expectations for the year ahead rebounded from a 35-month low in November, with 38 per cent of those surveyed predicting a rise in output volumes. Around 17 per cent forecast a reduction.
This came despite total new work falling in January as order books shrank.
Max Jones, director and head of construction at Lloyds, said: “The modest rise and further momentum will be welcomed by the sector.
“Despite ongoing challenges, including sticky cost inflation, there are signs that construction firms are optimistic about 2026. Many are focused on upskilling their workforce and investing in apprenticeships, and civil engineering is looking particularly busy as major new investments in water, energy and grid infrastructure get underway.”