UK construction sector contracts as May PMI hits lowest level since 2020

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UK construction May PMI low

Highlights

S&P Global reports UK construction PMI drops to 38.2 in May from 39.7 in April, underperforming the 40.2 median Reuters forecast and marking the lowest since May 2020.
Sector faces fastest cost increases since June 2022 and most widespread shipping delays since December 2022, attributed to higher fuel, transport costs and Strait of Hormuz closure.
Business sentiment weakens to second-lowest since end-2022, jobs cut for 17th consecutive month, and all-sector PMI falls to 48.7, the lowest since April 2025.

May survey shows deeper decline in output and orders

As reported by S&P Global, its monthly purchasing managers' index for the construction sector falls to 38.2 in May from 39.7 in April, the lowest reading since May 2020. The index remains well below the 50 threshold that separates growth from contraction, and also comes in below the 40.2 median forecast in a Reuters poll of economists.

Building firms in the survey report site delays, fewer tender opportunities and weaker demand tied to the Middle East conflict and political uncertainty in Britain. The decline is steepest in residential housebuilding, while commercial activity such as shops and offices shows the smallest fall.

Tim Moore, economics director at S&P Global Market Intelligence, says fuel surcharges and rapid increases in prices for energy-intensive raw materials continue to be felt across the construction supply chain. He adds that concerns about a prolonged decline in order books and weak near-term UK economic prospects weigh on business optimism in May.

Cost pressures and shipping delays hit sector outlook

Construction companies say their costs rise at the fastest pace since June 2022, driven by higher fuel, energy and transport expenses. Businesses also report the most widespread shipping delays since December 2022, partly because of the closure of the Strait of Hormuz.

Confidence about the next 12 months weakens to its second-lowest level since the end of 2022. Companies cut jobs for a 17th straight month, although the pace of layoffs is slower than in April, when job losses are the widest of this year.

The broader all-sector PMI, which also includes services and manufacturing, falls to 48.7 last month from 51.5 in April. That marks its lowest reading since U.S. President Donald Trump announces wide-ranging tariffs in April 2025.

Our earlier article on escalation risks in the Middle East described how the prolonged U.S.-Iran conflict and renewed threats of further military action were unsettling investors. We noted that oil prices were pushing higher and broader risk appetite was weakening as markets weighed the chance of a wider regional flare-up.

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