Longest contraction in nearly 20 years! UK construction industry PMI continues to shrink for 12 consecutive months, but signs of recovery may be seen in 2026.

An industry survey released on Wednesday showed that the output of the UK construction industry contracted for the 12th consecutive month in December, marking the longest continuous period of contraction in nearly twenty years. However, there were signs of optimism for 2026 in the survey. The S&P Global Construction Purchasing Managers' Index (PMI) recorded 40.1 in December, slightly higher than the five-and-a-half-year low of 39.4 in November. This decline extended the industry's period of sluggishness to 12 months, the longest continuous contraction since the global financial crisis of 2007-2009. Wednesday's reading was below the median of 42.5 predicted by economists and also below the 50 level that distinguishes growth from contraction. Tim Moore, Global Director of Economics Intelligence at S&P Global Market Intelligence, said, "UK construction companies reported a tough operating environment and declining workloads again in December, although the rate of decline eased compared to the five-and-a-half-year low seen in November." Moore stated, "Many companies mentioned weak demand and fragile customer confidence. Despite the elimination of uncertainty related to budgets, delayed spending decisions were still mentioned as reasons for the weak sales channels at the end of the year." Recent business surveys have also shown similar concerns about demand, investment, and hiring. Earlier, Chancellor of the Exchequer Rishi Sunak released his second annual budget in late November, which included a tax plan of 26 billion (about $35 billion), although the implementation of most measures has been delayed. Output in the business sector decelerated in December at the fastest pace in over five and a half years. While the downward trend in civil engineering has eased, it remains the weakest performing category in December. The sub-index for residential construction activity fell to 33.5, the lowest reading since May 2020 (when construction projects were halted due to the lockdown during the COVID-19 pandemic). The UK government is currently trying to accelerate housing construction projects. However, with the expectation of lower borrowing costs and the elimination of uncertainty from Sunak's budget, businesses have shown signs of confidence in the outlook, with expectations for business activity in the next 12 months reaching the highest level since July. Increased infrastructure spending and reduced inflationary pressures have also raised hopes for a turnaround. Total new orders and employment numbers decreased in December, but the declines were smaller than in November. The overall industry PMI - including the previously released December reports for the service and manufacturing sectors, as well as construction data - rose slightly from 50.1 in November to 50.4.