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Britain's construction sector showed signs of stabilising in July as the pace of decline eased across key segments, according to the latest S&P Global UK Construction Purchasing Managers' Index (PMI). Commercial construction and housebuilding recorded slower contractions, while new orders improved to their strongest level in several months. Employment continued to decline but at a slower pace, and subcontractor availability increased. Input cost inflation also moderated for the second consecutive month. The survey indicated improving business confidence, with construction firms expressing their strongest optimism for the year ahead since before the Iran conflict began.
Britain's construction sector remained in contraction during July, but the pace of decline slowed considerably, indicating that market conditions may be beginning to stabilise after a difficult second quarter of 2026, according to the latest S&P Global UK Construction Purchasing Managers' Index (PMI).
The headline PMI improved to 44.7 in July from 38.4 in June, surpassing the Reuters poll estimate of 40.0. Although the index remained below the 50-point mark that separates growth from contraction, the latest reading suggested that the sector's downturn had eased.
According to Tim Moore, Economics Director at S&P Global Market Intelligence, the July survey indicated that the UK construction sector had started to stabilise following the sharp slowdown witnessed during the second quarter of the year.
Commercial construction activity showed improvement during the month, with the commercial activity index rising to 46.8 from 41.5 in June, marking its highest level in four months. Housebuilding also remained under pressure, but the rate of decline slowed to its weakest pace since October 2025, indicating a gradual improvement in residential construction activity.
Civil engineering continued to be the weakest-performing segment among the three major construction categories. However, the pace of decline eased compared with June, when the sector had recorded its weakest performance in more than six years.
Demand conditions also showed signs of improvement. S&P Global's new orders index reached its highest level since September 2025, pointing to a slower decline in new business and suggesting that customer demand may be beginning to recover after several months of weakness.
Employment in the construction sector continued to contract for the nineteenth consecutive month. However, job losses slowed to their weakest pace since February, before the Iran conflict began. At the same time, subcontractor availability increased at the fastest rate since April 2025, indicating that labour market pressures were easing.
Cost pressures also moderated during the month. The survey's input cost index declined to 69.8 from 77.9 in June, marking the second consecutive monthly slowdown after reaching a near four-year high in May. The easing in cost inflation is expected to provide some relief to construction firms that have been facing elevated material and operating expenses.
Business confidence strengthened further, with construction companies reporting their highest level of optimism for the coming 12 months since February. The improved outlook reflected expectations of better demand conditions and greater market stability in the months ahead.
The broader UK Composite PMI, which combines manufacturing and services alongside construction, also moved back into expansion territory. The index rose to 51.6 in July from 48.4 in June, reaching its highest level in five months and indicating improving business activity across the wider economy.
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