The seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index  (PMI) – an index tracking changes in total industry activity – registered 38.4 in June, up slightly from May’s six-year low of 38.2 but still well below the neutral 50.0 value.

Construction output has decreased in each month since January 2025 and the latest fall was the second fastest since the start of the pandemic.

Commercial construction was the best-performing category and showed some resilience in June (index at 41.5). It was also the only segment to record a slower downturn in activity than in the previous month.

House building activity (index at 35.9) decreased at the sharpest pace in 2026 to date. Meanwhile, civil engineering activity fell to the greatest extent since April 2020 (index at 22.1).

Lower levels of construction activity were attributed to a mixture of subdued housing market conditions, higher borrowing costs, elevated business uncertainty and delayed project starts.

June data signalled another sharp fall in total new work, although the speed of the downturn was the slowest since March. Anecdotal evidence cited factors such as fewer new build house sales, weak business investment spending  and intense competition for new orders.

Some firms commented on improved opportunities to tender for defence and energy sector projects.

Cutbacks to employment numbers continued across the construction sector in June. This marked 18 months of sustained job shedding. Plus, subcontractor usage fell sharply. This contributed to the fastest improvement in subcontractor availability since April 2025.

But there are signs of improving optimism with twice as many construction companies (38%) expecting an increase in business activity over the year ahead as those that predict a decline (19%). This pointed to a marked rebound in business optimism from the six-month low seen in May.

However, confidence remained much weaker than the long-tun survey average. Positivity was often linked to forthcoming public sector projects and greater infrastructure spending, alongside the restart of delayed projects.

Tim Moore, economics director at S&P Global Market Intelligence, said the downturn in UK construction output had “lost some intensity” in June amid a softer reduction in commercial building work.

Brian Smith, head of cost management at AECOM, said: “The first slowdown in decline since March is a welcome sight, and it’s hopefully an early sign that the sector’s turning a corner.

“We’re in the peak summer season, and while uncertainty lingers, geopolitical tensions show some signs of easing and there are enough projects in the pipeline to keep order books healthy in the meantime.

“It’s also encouraging to see the government taking action on the Defence Investment Plan and nationally significant schemes like Heathrow make progress, as both will deliver a shot in the arm of UK plc. But long-term strategic investment mustn’t come at the expense of the rail, road and energy projects that dictate contractors’ fortunes today.

“Projects can’t be allowed to drift in the summer, with stakeholders hesitating on key decisions – and this extends to both public and private sectors. The sector needs more momentum and only new starts can provide it.”

Some signs of improvement have also been shown in the latest Business Barometer from Lloyds with UK construction firms reporting a two-point increase in overall business confidence to 46% in June.

More than half of the construction firms surveyed (60%) said that stronger customer or market demand was their main reason for optimism in the economy.

More than two thirds (67%) of construction firms expect their business activity to increase in the next year, up four points from 63% in May, while fewer than one in 10 (8%) expect weaker activity, down one point from 9% in May.

Construction was the only sector of those surveyed that saw an increase in confidence in their own trading outlook, which increased five points to 59%.

Businesses in the sector see entering new markets, making new hires or offering new products of services (42% each) as the biggest opportunities to grow their business in the next six months.

The overall business confidence reading for construction firms for June (46%) tracks slightly below the longer-term trend. Since June 2025, the sector’s 12-month average reading for overall business confidence is 47%.

Max Jones, Director and Head of Construction at Lloyds, said: “Many firms are now preparing for growth with confidence. Backed by strong demand and long-term investment in infrastructure, opportunities are emerging across the sector, creating momentum as businesses look towards the second half of the year.”