UK housebuilding activity remained in decline during July, although the pace of contraction eased to its weakest level since October 2025.
The seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index rose sharply from 38.4 in June to 44.7 in July. Any reading below 50 indicates falling activity.
Housebuilding recorded an index reading of 41.8, while commercial construction proved more resilient at 46.8. Civil engineering remained the weakest category at 38.3.
Across the wider construction sector, output has now fallen continuously since January 2025 – the longest sustained downturn since the global financial crisis.
TENDER PIPELINE SHOWS IMPROVEMENT
New orders declined at their slowest rate for 10 months, with some construction businesses reporting better tender opportunities across residential developments, commercial schemes and transport infrastructure.
Expectations for activity over the next year also rose to a five-month high, while input-cost inflation eased and supplier performance improved.
However, subdued economic conditions, higher borrowing costs and geopolitical uncertainty continue to constrain client demand and developers’ appetite to begin projects.
Tim Moore, Economics Director at S&P Global Market Intelligence, says the figures indicate that construction is beginning to stabilise following a sharp second-quarter downturn.
He comments: “Survey respondents commented on signs of a turnaround in client demand and a revival in new tender opportunities in some cases, despite subdued underlying market conditions.
“This contributed to more upbeat business activity expectations for the year ahead, with confidence levels the highest since February.”
HOUSING TARGET REQUIRES INVESTMENT
Terry Woodley, Managing Director of Development Finance at Shawbrook, says the figures underline the headwinds facing an industry attempting to regain momentum.
He adds: “The Government’s plans to deliver 1.5 million new homes over the course of this parliament will require sustained investment across the sector to overcome these softer construction figures.
“As developers navigate these tighter conditions to keep existing projects on track and continue progressing new schemes, access to flexible and reliable funding becomes even more essential.”
TRANSACTION REFORM ALSO NEEDED
Maria Harris, Chair of the Open Property Data Association, says increasing construction alone will not create a healthier housing market.
She comments: “Too many transactions still take months to complete, with buyers and sellers facing uncertainty at every stage.
“Modernising the homebuying process through better upfront information, greater use of digital data and a more transparent transaction process would help improve certainty for everyone involved.”
Richard Pike, Sales and Marketing Director at Phoebus Software, adds that affordability pressures are causing buyers to delay moves, making developers more reluctant to bring forward new sites while demand remains uncertain.
