UK construction activity dropped sharply at the start of Q3, according to the S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) survey.
Total industry activity fell at the fastest pace since May 2020.
The PMI posted at 44.3 in July, down from 48.8 in June, showing the steepest contraction in over five years.
A fall in work was reported by around 29% of firms, who said there were site delays, lower volumes of new business and weaker customer confidence.
Some also pointed to less work on public sector projects.
Civil engineering saw the biggest drop in July and residential building fell again, pulling the headline index down further.
Commercial construction also slipped.
Demand stayed weak, with new work declining for the seventh month in a row.
The rate of contraction was the fastest since February.
Looking ahead, companies were still expecting growth on balance, but expectations stayed low compared to the long-term average.
Confidence did pick up slightly from June’s two-and-a-half-year low, but worries about the broader economic outlook held back projections.
Construction material purchases fell again in July, though at the slowest rate since early 2025. Delivery times for materials got longer for the first time in six months.
Firms saw higher charges from suppliers in July, driving up operating expenses sharply, but inflation overall was the softest since January.
Payroll numbers continued to fall, extending the trend to seven months.
Firms reported lay-offs, recruitment freezes and not replacing leavers.
Use of subcontractors was cut back, but their rates still rose sharply, as has been the trend since late last year.
Joe Hayes, principal economist at S&P Global Market Intelligence, said: “Having trended upwards in recent months, our survey data for July signal a fresh setback for the UK construction sector, with total industry activity falling at the sharpest rate since May 2020.
“Dissecting the latest contraction, we can see a fresh and sharp drop in residential building, as well as an accelerated fall in work carried out on civil engineering projects.
“Forward-looking indicators from the survey imply that UK constructors are preparing for challenging times ahead.”
Hayes added: “They’re buying less materials and reducing the number of workers on the payroll. Expectations also continue to underwhelm, despite a modest pick-up in confidence from June’s two-and-a-half-year low.
“Anecdotally, companies reported a lack of tender opportunities and a hesitancy from customers to commit to projects.
“Broader themes of uncertainty, both domestically but also internationally, will do little to reignite investment appetites.”
