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Britain’s construction sector contracted at its fastest pace in six years during the past month as economic uncertainty, inflationary pressures and disruptions linked to the Iran conflict weighed on project activity. Data from S&P Global showed a sharp decline in new work, with residential construction emerging as the weakest segment. Rising fuel, energy and transport costs pushed input prices higher, while shipping disruptions added further pressure on supply chains. The sector also continued to reduce its workforce, and business confidence weakened amid concerns over future order books and the broader economic outlook.
Britain’s construction sector experienced its sharpest slowdown in six years during the past month as economic uncertainty and inflationary pressures linked to the Iran conflict triggered a significant decline in new work, according to the latest survey from S&P Global.
The monthly Purchasing Managers' Index (PMI) for the UK construction sector fell to 38.2 in May from 39.7 in April. The reading marked its lowest level since May 2020, when the COVID-19 pandemic disrupted construction activity and forced the suspension of numerous projects across the country.
The index remained well below the 50-point threshold that separates expansion from contraction and has stayed in contraction territory since the beginning of 2025. The latest figure was also substantially lower than economists’ median forecast of 40.2 in a Reuters survey.
Construction companies reported a combination of site delays, fewer tender opportunities and weaker client demand. Survey participants attributed these challenges to the ongoing conflict in the Middle East as well as continued political uncertainty in the UK. Among the major construction segments, residential housebuilding recorded the steepest decline, while commercial projects such as offices and retail developments proved comparatively more resilient.
The survey also highlighted a sharp increase in cost pressures across the industry. Construction firms reported the fastest rise in input costs since mid-2022, when global commodity and energy markets were impacted by Russia’s invasion of Ukraine. Higher fuel, energy and transportation expenses were identified as the primary drivers of inflation.
Supply chain challenges intensified during the month, with companies reporting the most widespread shipping delays since late 2022. Industry participants linked part of the disruption to the closure of the Strait of Hormuz, a key global trade route that has affected the movement of goods and materials.
Tim Moore, Economics Director at S&P Global Market Intelligence, stated that fuel surcharges and rapid increases in the prices of energy-intensive raw materials continued to affect construction supply chains. He also noted that concerns over shrinking order books and an unfavourable near-term economic outlook weighed heavily on business sentiment.
Business confidence remained subdued, with optimism regarding the next 12 months reaching its second-lowest level since the end of 2022. Many firms expressed concern about the sustainability of future workloads amid weaker demand conditions and persistent economic uncertainty.
Employment levels in the sector continued to decline, extending a trend that has now lasted for 17 consecutive months. Although companies reduced jobs at a slower pace than in April, workforce numbers continued to come under pressure as firms adjusted to lower workloads and tighter market conditions.
The weakness in construction activity reflected broader challenges across the UK economy. The all-sector PMI, which combines data from services and manufacturing alongside construction, fell to 48.7 during the month from 51.5 previously, indicating an overall contraction in business activity. The reading was the lowest since the period following the announcement of broad US tariff measures by President Donald Trump in 2025.
Source Reuters
5th Jun, 2025
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