Construction activity in the UK declined for the eighth month in a row in August, according to the latest PMI report.

While the fall was at a slower pace than seen in July, reduction in new work and employment were seen with optimism at its lowest level since December 2022.

The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index tracking changes in total industry activity – registered 45.5 in August, up from 44.3 in July, which was the lowest reading for just over five years.

However, the index was still well below the neutral 50.0 value and indicative of another solid decline in overall construction output.

August data indicated that a slower reduction in commercial building (index at 47.8) helped to offset steeper declines in residential (44.2) and civil engineering activity (38.1). The latest reduction in output across the house building category was the sharpest since February.

Civil engineering was the weakest-performing segment in August, with business activity decreasing at the fastest pace since October 2020. Survey respondents again commented on a lack of new projects to replace completed work.

Total new orders across the construction sector decreased for the eighth month running in August, although the rate of decline eased to the least marked since January. Construction companies widely commented on challenging market conditions, intense price competition and headwinds from sluggish UK economic activity.

Lower volumes of output and incoming new work led to hiring freezes and the non-replacement of departing staff in August. Employment numbers have fallen throughout 2025 to date, and the latest reduction was the fastest since May.

A number of firms commented on efforts to mitigate rising payroll costs by cutting back on recruitment. Subcontractor usage also decreased markedly in August and at one of the fastest rates seen over the past five years.

A lack of forthcoming project starts led to a solid reduction in purchasing activity across the construction sector. The latest decline in input buying was the sharpest for three months.

The survey data highlighted a renewed weakening in business optimism across the construction sector. Around 34% of the survey panel predict a rise in output during the year ahead, while 22% forecast a reduction. This pointed to the lowest degree of confidence since December 2022.

Construction companies reported subdued market conditions, elevated business uncertainty and risk aversion among clients. That said, lower borrowing costs and the prospect of rising infrastructure work were cited as positive factors.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Construction activity has decreased throughout the year to-date, which is the longest continuous downturn since early-2020.

“August data signalled only a partial easing in the speed of decline after output fell at the fastest pace for over five years in July. Sharply reduced levels of housing and civil engineering activity were again the main reasons for a weak overall construction sector performance.

“Commercial work showed some resilience in August, with the downturn the least marked for three months. There were some positive signals on the supply side as vendors’ delivery times shortened, subcontractor availability improved and purchasing price inflation hit a 10-month low.

“However, easing supply conditions mostly reflected subdued demand and a lack of new projects. Elevated business uncertainty and worries about broader prospects for the UK economy meant that construction sector optimism weakened in August.”

Brian Smith, head of cost management at AECOM, added: “An increase in August’s activity, despite remaining below the 50.0 mark, paints a more encouraging picture for the sector. However, even as the pace of decline has eased, firms will be looking for a longer-term stabilisation in new orders before adding capacity to their books.

“In this environment, contractors should keep a tight grip on cash flow and costs, act early if challenges emerge, and remain realistic about risks so they are not caught off guard if market conditions deteriorate.

“The government’s return from recess will be key as it looks to implement a new 10-year infrastructure plan, backed by £725bn of public investment. However, ambition alone won’t be enough.

“Unlocking projects, accelerating delivery and providing the certainty required for long-term planning will only be possible if the public and private sectors work in partnership to convert investment into tangible outcomes that reshape the UK’s economic and social landscape.”