The UK’s construction sector remains under pressure, according to the latest PMI report, with cost inflation at its highest rate since November 2022.

Construction output fell again in March, led by a sharp drop housing activity.

The latest survey also suggested operating margins were under considerable pressure from a rapid acceleration in input cost inflation. Construction companies widely noted that the war in the Middle East had pushed up fuel, transportation and raw material prices.

Nearly half of the survey panel (48%) reported an increase in their average cost burdens during March, while only 3% signalled a decline. The resulting seasonally adjusted Input Prices Index pointed to a rapid acceleration in cost inflation to its highest since November 2022.

At 45.6 in March, the headline seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index (PMI) – an index tracking changes in total industry activity – rose from 44.5 in February but remained below the neutral 50.0 value for the 15^th month in a row

Survey respondents generally cited falling confidence among clients and a lack of new project starts. However, resilient energy sector demand was reported in March.

Some firms suggested that a return to typical weather conditions helped to moderate the overall downturn in construction output after delays due to unusually wet weather in February.

House building activity (index at 38.2) again declined more quickly than civil engineering (44.8) and commercial construction (47.1). All three sub-categories recorded slower rates of contraction than in February.

The latest fall in civil engineering activity was the least marked since May 2025, which some firms linked to a gradual turnaround in major infrastructure work. Total new business decreased at the fastest pace for four months in March.

Lower volumes of new work have been recorded in each month since January 2025, with the latest reduction attributed to rising risk aversion among clients in response to elevated global economic uncertainty. Many firms noted that the conflict in the Middle East had negatively impacted confidence among clients.

Construction companies recorded a faster decline in employment during March. There were also sharp cutbacks to subcontractor usage and purchasing activity in response to reduced workloads.

Concerns about the inflation outlook, higher borrowing costs and the prospect of a protracted war in the Middle East all weighed on business activity expectations across the construction sector during March. Although still upbeat overall, the latest data indicated that business optimism fell markedly since February to its lowest for three months.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies indicated a sustained downturn in business activity during March, led by another steep reduction in residential work.

“A degree of resilience continued in the commercial and civil engineering segments. There were some reports of a turnaround in infrastructure work, especially in the energy sector.

“March data suggested a challenging near-term outlook for construction activity as total new orders decreased at one of the sharpest rates seen over the past six years. Survey respondents commented on fragile consumer confidence and delayed investment decisions in response to the outbreak of war in the Middle East.”