UK construction activity has fallen at the steepest pace since May 2020, according to the latest PMI report.

The survey data showed the downturn in the sector had intensified with year-ahead expectations remaining subdued. 

According to the latest S&P Global UK Construction Purchasing Managers’ Index (PMI) marked decreases in volumes of work carried out across all three monitored sub-sectors. But a considerable drag came from a fresh drop in residential building.

The PMI figure for July was 44.3, down from 48.8 in June and well below the 50 ‘no change’ mark. It was the steepest fall since May 2020, during the first UK Covid lockdown.

Challenges for industry include site delays, lower volumes of incoming new business and weaker customer confidence. Some survey respondents also cited lower work undertaken on public sector projects.

Civil engineering saw the sharpest drop during July with the PMI pulled lower by a renewed decline in residential building activity. As for commercial construction, a marked but softer fall was registered.

Looking ahead to the next 12 months, surveyed companies were optimistic of growth in activity on balance, but expectations were weak when compared with their long-run trend. This was despite business confidence ticking up slightly from June's two-and-a-half-year low. Concerns surrounding the broader economic outlook weighed on company growth projections.

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.

“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.”

Brian Smith, head of cost management and commercial at AECOM, said a slower summer for construction reflected “ongoing caution” in the market, with clients holding back decisions amid cost pressures and capacity concerns.

“This marks the seventh consecutive month of declining activity, but clearer direction from government is helping to steady sentiment and reframe expectations for the second half of the year,” he added.

“The new Infrastructure Pipeline marks a welcome shift from strategy to delivery. It provides the long-term certainty the sector needs to plan and prioritise, with 780 public and private sector projects worth £530bn helping to define the scale of opportunity ahead. A stable pipeline, insulated from political cycles, is essential to unlocking growth and driving efficient delivery.

“But the scale of what’s set out in the pipeline cannot be delivered without the right capacity in place. Labour shortages remain a challenge across the sector, particularly in technical and delivery roles. Turning visibility into progress will require investing in the people and skills needed to build at pace.”