Housebuilding activity hits 2026 low point amid construction downturn

Activity in the UK housebuilding sector fell at the fastest pace so far this year as the wider construction sector remained firmly in contraction, according to new figures.

The S&P Global UK construction PMI showed a reading of 38.4 in June, marking a slight improvement on May’s six-year low of 38.2, but still the second fastest fall in output since the start of the Covid pandemic.

Any reading above the 50 threshold indicates that activity in the industry is increasing, while anything below means it is contracting.

Housebuilding and civil engineering remained under significant pressure, with bigger falls in activity than in May and the latter seeing its weakest performance since the start of the pandemic.

Commercial construction was the only part of the industry to record a slower downturn in activity than in May, the report showed.

But experts said the figures signalled the sector may have pulled out of its nosedive.

Kiran Raichura, chief commercial real estate economist at Capital Economics, said: “The construction sector appears to have stabilised in June as, after three straight months of falls, the headline construction PMI rose marginally.”

He added: “The latest data suggest that construction activity has reached a floor, with forward-looking expectations improving.

“However, it’s worth noting that the rises in input prices that we have already seen over the last few months will still feed through to construction costs over the coming months, while the level of activity remains in the doldrums for both the commercial and housing markets.”

The report showed easing cost pressures in June while supply chain disruptions were also “notably less acute” than in April and May, with fewer shipping delays.

There was also a rebound in business optimism as 38% of construction firms surveyed for the report said they expect an increase in business activity over the year ahead, with 19% predicting a decline.

This follows a six-month low in optimism recorded in May.

Tim Moore, economics director at S&P Global Market Intelligence, said: “New work decreased to the least marked extent since March, despite widespread reports of challenging market conditions.

“Construction companies commented on headwinds from subdued housing sales, elevated interest rates and squeezed consumer finances, alongside cutbacks to business investment plans.

“Some firms noted delays with infrastructure work and fewer public sector tender opportunities, but energy markets were cited as an area of positivity.”