The UK construction sector showed a slight easing in its rate of decline in March but mounting supply chain pressures and rising costs continue to weigh heavily on the outlook.
The latest S&P Global/CIPS Construction PMI rose to 45.6 in March, up from 44.5 in February, signalling a slower contraction – although activity remains firmly in negative territory. Civil engineering improved to 44.8 from 41.0, but housebuilding stayed below 40 for a fifth consecutive month, highlighting ongoing weakness in residential development.
The sector is facing growing pressure from global instability, with disruption to energy markets and supply chains pushing up input costs and delaying project timelines.
Developers and contractors are increasingly reluctant to commit to fixed-price contracts, while some schemes are being paused as investors reassess viability.
WEAKER HOUSING DEMAND
Rising mortgage rates and reduced product availability are also feeding through to weaker housing demand, further dampening confidence across the development pipeline.
Nick Cattini (main picture, inset), Specialist Construction and Infrastructure Partner at RSM UK, says: “[The latest] figures show slowed contraction within UK construction, as the sector grapples with significant headwinds against a weak economic backdrop.
“Uncertainty across global energy and fuel markets has fed directly into input costs and transport expenses.
“Industry surveys and cost data indicate that energy, fuel and materials continue to experience upward pressure through early 2026, reinforcing caution among developers and contractors alike.”
PROJECT DELAYS
And he adds: “Concerns over the longer-term availability and security of materials are weighing on sentiment across construction businesses.
“Disruptions to global supply chains, combined with energy-intensive material production and constrained logistical routes have reduced a willingness amongst contractors to commit to fixed-price or near-term starts.
“As a result, we are seeing delays to project starts, with some investors taking longer to reevaluate scheme viability.”
And Thomas Pugh, Chief economist at RSM UK, adds: “The ceasefire in Iran announced last night is unambiguously good news for the UK economy…
“Ultimately, the UK is still likely to face another bout of stagflation this year as elevated uncertainty, financing and energy costs dampen growth and boost inflation.”
