UK construction slump deepens as housebuilding hits weakest stretch of the year

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UK construction slump deepens

Highlights

S&P Global's UK Construction PMI drops to 43.6 in October from 46.1 in September, signaling a sharper-than-expected sector contraction.
Housing activity marks its steepest decline since December 2025, with only COVID-19 and the financial crisis showing larger falls according to S&P Global.
Input costs for construction surged to their highest since June, while business optimism hit its lowest since May, despite some resilience in energy and data centre projects.

October survey points to sharper construction contraction

As reported by Reuters, citing S&P Global, its UK Construction PMI falls to 43.6 in October from 46.1 in September, coming in below all forecasts in a Reuters poll of economists, whose median estimate had pointed to no change.

Readings below 50 indicate contraction, and the construction PMI remains in that territory for nearly two years. Civil engineering and commercial activity also contract, but the decline is most severe in housing, where activity posts its biggest drop since December 2025.

Only the COVID-19 pandemic and the global financial crisis show larger drops in housebuilding activity than those seen last month and in December 2025. Tim Moore, economics director at S&P Global Market Intelligence, says companies report severe headwinds in the housebuilding sector from rising borrowing costs, weak consumer confidence and elevated economic uncertainty.

Cost pressures rise as broader business outlook softens

Moore says there are also reports of strong demand for data centre projects, alongside rising workloads in the energy and utilities sectors, suggesting some pockets of resilience despite the wider downturn.

The survey's index of input costs rises to its highest level since June after jumping by more than 10 points from the previous month, with respondents citing fuel surcharges and energy costs. Business optimism also weakens to its lowest level since May.

Across the wider economy, the all-sector PMI, which combines construction, manufacturing and services, rises to 52.1 in October from 51.5 in the previous month, marking its strongest reading since February.

Our earlier coverage of Chancellor John Healey’s pre-Budget stance focused on the government’s commitment to deficit reduction ahead of the October 28 fiscal statement, alongside signs of only modest economic resilience. We noted that UK GDP grew 0.1% in August, beating expectations but slowing from July, while policymakers and politicians debated how to balance fiscal discipline with measures to support growth and ease pressure on households and businesses.

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