A sharp drop in housing activity meant construction output fell at a faster pace in August, according to the latest PMI data.

The S&P Global UK Construction Purchasing Managers’ Index dropped to 44.3 in August from 44.7 in July – and well below the “no change” figure of 50.

It was the 12^th successive month of decline in the sector with a reduction in new projects, particularly house building starts.

All three sub-sectors recorded a reduction in construction activity during August, but housing was the only category to register a faster pace of contraction than in July.

The downturn in residential work (index at 37.6) was sharper than seen elsewhere in the construction sector. Commercial activity (47.8) fell at the slowest rate since January, while civil engineering activity (40.5) decreased to the least marked extent since March.

Construction companies signalled a fall in total new order intakes during August, but the rate of contraction was only modest and the slowest since September 2025. Anecdotal evidence cited heightened risk aversion in the wake of the Middle East conflict and delayed decision-making by clients, but some firms noted improvements in infrastructure work.

Higher fuel costs, transport bills and raw material prices also contributed to another sharp increase in purchasing expenses during August.

Brian Smith, head of cost management at AECOM, said industry will be disappointed that the rebound in output seen in July was a one-off, with the sector no closer to a return to growth.

“We’ll need to see a material downward shift in interest rates and inflation if activity is going to rise above the 50-point benchmark and, crucially, stay above it,” he added.

“Client confidence is slowly building and more project tender opportunities are available, so the contractors who’ll get ahead will be the ones that have retained capacity and are investing in efficiency. With investment in energy infrastructure strong, demand in the commercial market for sustainable refurbishment and the government’s plans to invest in social and affordable homes, there’s reason for the industry to feel positive.”

Read the full report here.