The UK construction downturn showed signs of easing in September, with activity declining at its slowest pace since the start of the year, according to the latest PMI data.

The S&P Global UK Construction PMI, a closely watched indicator of industry activity, rose from 44.3 in August to 46.1 in September. While the index remained below the 50.0 threshold that separates growth from contraction, it pointed to the least marked decline in output for eight months.

All three main sectors of the industry recorded slower rates of contraction. Commercial construction proved the most resilient, with its activity index reaching 48.5 and business activity declining only marginally at the slowest pace since May 2025. Housing remained the sector's weakest performer, with an index reading of 40.7.

Survey respondents continued to cite subdued market conditions, geopolitical uncertainty and elevated borrowing costs as factors holding back activity.

However, sentiment showed signs of improvement, with around one-third of firms expecting business activity to increase. Planned infrastructure investment was highlighted as a key source of optimism, although concerns remain over political uncertainty, a fragile housing market and persistent inflationary pressures.

Many in the sector will be looking to chancellor John Healey's first Budget on 28 October to bring confidence to the market. Prime minister Andy Burnham has already announced plans for a new equity loan scheme in England - Your First Home - which will be confirmed at the Budget to support more people into home ownership and stimulate the struggling property sector. 

The Civil Engineering Contractors Association (CECA) has urged the government to use the Budget to provide greater certainty for the infrastructure sector by committing to stable, long-term investment and turning its 10-year Infrastructure Strategy into a fully funded delivery programme. It has also called for continual imrpovements to the UK Infrastructure Pipeline to give contractors “practical, reliable, and long-term market certainty”.

Brian Smith, head of cost management at AECOM, said the sector was beginning to adapt to ongoing economic challenges and would be ready to move quickly on stimulus, such as the new first-time buyer schemes.

“It’s encouraging that the summer ends on a positive note but contractors will still take today’s slowdown in decline with a pinch of salt. All signs point to an interest rate rise in the near future, which will weigh on activity in the short-term,” he said. 

“However, beneath the headline figures, we’re finally seeing the industry settle into the current environment and investors have adapted to the higher borrowing costs, geopolitical uncertainty and a weaker economic backdrop. Translating this resilience into genuine confidence will rely on targeted measures to shift the dial – the government’s new scheme for first-time buyers is a good example, and it’s already triggered a rise in housebuilders’ share prices. Those that have retained the capacity to deliver will be best placed to capitalise on the uptick in new work in the pipeline.”

Max Jones, director of infrastructure and construction at Lloyds, said firms continued to face a challenging operating environment, particularly as higher energy prices feed through into project costs.

“At the same time, many businesses are seeing longer-term opportunities emerge through planned investment in energy, water, transport, ports and airports. Healthy balance sheets are also giving some firms the confidence to pursue targeted acquisitions despite near-term uncertainty.

“The upcoming Budget will be an important moment for the sector. Firms are looking for consistency on long-term infrastructure commitments, providing them with the confidence they need to plan ahead.”

Separate data from Glenigan’s October Construction Index also suggested infrastructure activity is helping to support the wider industry.

While residential and non-residential project starts remained under pressure, infrastructure and utilities work provided a significant boost. Residential starts fell 8% against the previous three months and were down 33% year-on-year, while non-residential starts dropped 15% quarter-on-quarter and 16% compared with the same period last year.

In contrast, civil engineering starts surged by 101% compared with the preceding three months and were 43% higher than a year earlier.

Overall, activity edged down 2% on the preceding three months and remains 18% below last year. Tough market conditions, stubborn borrowing costs and a Chancellor promising ‘fiscal discipline’ have kept the industry cautious and, so far, a new prime minister with big construction ambitions has yet to materialise into an improved picture on the ground.

Glenigan’s Allan Willen said: “A welcome surge in civil engineering projects partially offset a decline in residential and non-residential project starts during the last three months. Whilst private housing starts stabilised against the previous three months, they remained sharply down on a year earlier.

“Looking ahead, the new first-time buyer scheme announced by the Prime Minister will hopefully help to rebuild market confidence and support a recovery in private housebuilding over the coming months. A Budget that gives developers certainty could get stalled schemes moving.”

Click here to read the full PMI report