The downturn in the UK construction sector showed signs of easing in May.

Output and new orders both fell at the slowest pace since January, while growth projections for the year ahead improved again.

The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index tracking changes in total industry activity – posted 47.9 in May, up from 46.6 in April, to signal the slowest reduction in output volumes since January. The latest data was still below the 'no change' figure of 50.

Lower business activity has been recorded throughout 2025 to date, but the latest fall was only modest.

House building was the weakest-performing segment in May (index at 45.1). The downturn in residential construction work accelerated since April amid ongoing reports of subdued demand conditions.

Civil engineering also decreased at a solid pace in May (45.9), which extended the current period of contraction to five months. Meanwhile, commercial work (49.5) fell only marginally and the rate of decline was the slowest since the downturn began in January.

Total new work received by UK construction companies decreased to the least marked extent for four months in May.

Survey respondents attributed reduced order intakes to delayed decision-making among clients and cutbacks to capital spending budgets.

May data indicated that construction firms remained reluctant to backfill vacancies amid a lack of new work to replace completed projects and pressure on margins from rising payroll costs. Employment numbers fell at the fastest pace for nearly five years.

Purchasing activity was reduced in response to lower workloads. Input buying has now fallen for six months running. This resulted in fewer pressures on supplier capacity and a subsequent improvement in delivery times during May.

Overall cost pressures continued to drift down from the 26-month high seen in March. Construction companies widely noted efforts by suppliers to pass on higher payroll costs. Aggregates, concrete, insulation and timber were commonly reported as up in price, while a number of firms noted that fuel costs had decreased.

Meanwhile, business activity expectations for the year ahead edged up to the highest since December 2024. Around 39% of the survey panel forecast a rise in output levels, while 16% predict a decline.

Positive projections were attributed to hopes of a turnaround in housing market conditions, greater infrastructure work, and the impact of lower borrowing costs on client demand. This was balanced against concerns about the general UK economic outlook and the negative impact of rising business uncertainty on sales pipelines.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The construction sector continued to adjust to weaker order books in May, which led to sustained reductions in output, staff hiring and purchasing.

“However, the worst phase of spending cutbacks may have passed as total new work fell at a much slower pace than the near five-year record in February. Housing activity was the weakest-performing segment in May as demand remained constrained by elevated borrowing costs and subdued confidence.

“Commercial work was close to stabilisation after a marked decline in April, suggesting that fears about domestic economic prospects have abated after the initial shock of US tariff announcements.”

Brian Smith, head of cost management and commercial at AECOM, said: “The sector continues to rebuild following a disappointing start to the year, brought on by a stagnant economy and challenging trading conditions. And, what’s more, all things point to a bright summer ahead. 

 “We must see a Spending Review that will bring prosperity and long-term direction for the sector, as the chancellor prepares to reform rules to the Green Book, set out the details of the 10-year infrastructure strategy and deliver £113bn of capital investment.

“This stable pipeline of funding for infrastructure and housebuilding will be just the tonic for developers, local authorities and contractors poised to greenlight schemes across the country. 

 “But translating this commitment into efficient, quality delivery is where the next challenge lies. Skills and capacity in planning teams needs to be urgently addressed, and contractors will need support to bolster the workforce so they can successfully deliver on the 10-year strategy.”