UK construction activity plunges to pandemic-era lows

UK construction activity contracted sharply in October, recording its steepest decline in more than five years as political uncertainty prompted clients to delay projects, according to S&P Global’s closely watched survey, Financial Times reports.

The construction purchasing managers’ index fell to 44.1 in October from 46.2 in September, below the 50 threshold separating growth from contraction for the tenth consecutive month. The reading marked the longest downturn since the financial crisis and undershot the 46.7 consensus forecast.

“Reduced workloads were again widely attributed to risk aversion and delayed decision-making among clients, which contributed to a slower than expected release of new projects,” said Tim Moore, economics director at S&P Global Market Intelligence.

Broad-based weakness

The decline was widespread across subsectors. Civil engineering posted the sharpest contraction at 35.4, its lowest since May 2020, while residential construction fell to 43.6, the weakest in eight months. Only commercial building showed relative resilience, though it remained in contraction at 46.3.

Shrinking workloads and rising payroll costs drove the fastest reduction in staffing levels in just over five years, while demand for construction materials dropped at an accelerated pace.

Policy headwinds ahead

The figures come as Chancellor Rachel Reeves prepares to unveil tax increases later this month to address an estimated £20bn-£30bn gap in public finances. Market speculation about higher property taxes and broader fiscal tightening has added to client hesitation.

Elliott Jordan-Doak, economist at Pantheon Macroeconomics, warned the data points to “downside risks” for fourth-quarter GDP growth. “The plummeting PMI suggests projects are being postponed ahead of the Budget,” he said.

Matt Swannell at EY Item Club described the outlook as “mixed,” noting that while government investment and planning reforms could provide support, “ongoing uncertainty and further tax increases may cause some private sector projects to be delayed or cancelled.”