The UK’s construction is showing signs of stabilising, according to the latest PMI data.

Output levels fell again during July, but at the slowest pace since March. At 44.7 in July, up from 38.4 in June, the S&P Global UK Construction Purchasing Managers’ Index (PMI) – an index tracking changes in total industry activity – reached its highest level for four months but still remained below the neutral 50.0 threshold.

Reduced volumes of business activity have been recorded since January 2025, which is the longest continuous period of decline since the global financial crisis.

Much slower rates of contraction were seen in all three main sub-sectors in July. Commercial work (index at 46.8) showed the greatest resilience, while civil engineering activity again saw the steepest pace of decline (38.3). Meanwhile, house building activity decreased at the least marked pace since October 2025 (index at 41.8).

Total new business received by construction companies fell at the slowest pace for 10 months in July. Some firms commented on a recent turnaround in tender opportunities, including for commercial development, residential projects and transport infrastructure work.

However, many survey respondents also noted that heightened geopolitical uncertainty and subdued domestic economic conditions continued to weigh on customer demand.

But expectations for the year ahead remained positive, with around 38% predicting an expansion and only 17% anticipating a decline. This signalled the strongest degree of optimism since February.

Tim Moore, economics director at S&P Global Market Intelligence, said: “July data suggests that the performance of UK construction sector has started to stabilise after a sharp downturn throughout the second quarter of 2026. Business activity levels continued to decline in all three main categories, but in each case the rate of contraction was much slower than in June.”

But Brian Smith, head of cost management at AECOM, said changes in the economic climate are needed to get the sector on an upward trajectory.

“A summer marked by settled weather would usually be an opportunity for contractors to drive growth in output,” he said. “But, despite decline slowing further, firms’ prospects aren’t going to change materially until we see movement in the economic outlook.

“Many projects are still in a holding pattern and awaiting a green light from clients who remain cautious of stubbornly high inflation and interest rates. One thing that will boost confidence is speedy decision-making from the government. The Social and Affordable Housing Programme is one example that will spur builders into action, but we can’t afford even a moment’s delay.

“Progress on nationally significant infrastructure schemes will also help to strengthen order books in the long-term and give contractors the foundation they need to invest in jobs and capacity. Heathrow is the best example of where large-scale infrastructure, with no half-measures, will supercharge the economy.”