UK construction activity declined sharply last month, hitting its lowest level since the early days of the Covid-19 pandemic. The drop highlights the difficulty in meeting the government’s goal of building 1.5 million homes by the next election.
Industry survey data confirmed a steep decline in July. The construction sector’s PMI dropped to 44.3 from 48.8 in June. Any score below 50 indicates contraction, reflecting real weakness in UK construction activity.
The main cause was a collapse in housebuilding, which fell from 50.7 to 45.3 in just one month. Civil engineering also declined, while commercial construction experienced a smaller but still noticeable drop.
The survey, based on 150 construction firms, serves as an early indicator for UK policymakers and economists. Experts say UK construction activity is falling amid worsening economic conditions, inflation, and international trade uncertainty.
Global disruptions, including US tariffs, and rising costs are pressuring developers to pause or cancel projects. The Bank of England may cut interest rates soon, which could slightly ease financing challenges.
However, the timing of this cut may be too late to reverse the current slowdown in the sector. Government reforms include updated planning rules, new town developments, and a £39 billion housing investment pledge.
You can learn more about UK housing policy reforms in our dedicated policy section. Despite these efforts, companies face labour shortages and rising employer tax costs, especially national insurance increases.
Many now hesitate to begin projects or tender for contracts due to uncertainty. This has led to reduced business activity and fewer housing starts across the UK. Still, some analysts remain hopeful about a future recovery in UK construction activity.
They expect lower interest rates and increased government investment to help gradually stabilise the market, the outlook for UK construction activity remains uncertain. However, new reforms may provide long-term support.
For more UK business news updates, follow London Pulse News.
