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UK construction activity stablisised at the start of 2026, with January data pointing to a much slower rate of decline than at the end of last year, according to the latest seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index (PMI).
The Index rose sharply to 46.4 in January from December’s five-and-a-half-year low of 40.1. While still below the 50.0 threshold that signals growth, the reading was the highest since June 2025, and indicated the slowest reduction in output for seven months.
All three major sub-sectors recorded weaker rates of contraction. House building is still the weakest-performing area, with an index reading of 39.3, although the pace of decline was the slowest in three months. Firms continued to report a lack of new residential projects and subdued demand. Civil engineering activity also fell sharply, posting a reading of 40.6.
Commercial construction was the strongest segment in January, with its index rising to 48.4, the least severe decline since May 2025. Some respondents pointed to improved investment sentiment and greater clarity following the Autumn Budget, which they said had helped to stabilise demand for commercial projects.
Total new work fell at the slowest pace for three months. Where order books continued to weaken, companies cited fragile client confidence and risk aversion, particularly in the housing market. However, there were early signs of improvement, including reports of a turnaround in public sector work and increased sales enquiries for commercial developments.
Business confidence also improved. Around 38% of firms surveyed expect output to rise over the next 12 months, compared with 17% who anticipate a decline, marking the highest level of optimism since May 2025. Lower borrowing costs, increased infrastructure spending and hopes of a housing market recovery were cited as supportive factors.
Tim Moore, economics director at S&P Global Market Intelligence, said the data suggested the sector had “exited its tailspin”, though he warned that margins remained under pressure from rising costs and subdued demand. “Supply conditions improved again in January. Lead times for the delivery of construction items shortened for the sixth month in a row and subcontractor availability increased at a solid pace. However, margins were under pressure as higher wages and raw material prices led to the sharpest rise in purchasing costs since September 2025,” he said.
