UK builders hopeful of turnaround as PMI shows slowdown easing

Builders across sectors continue to struggle with cost pressures eating into their margins

Published Fri, Feb 6, 2026 · 06:09 AM

Housebuilding remains plagued by sluggish demand, weak client confidence and a lack of new project starts, making it the weakest construction sub-sector. PHOTO: BLOOMBERG

[LONDON] Britain’s construction industry shrank for a 13th straight month in January, according to a prominent survey, but the pace of decline eased and builders are increasingly confident of a turnaround.

S&P Global’s overall construction purchasing managers’ index (PMI) rose to 46.4 from December’s 40.1. Although the indicator remained below the 50 threshold signalling contraction, it was the highest reading in seven months and was well-above economists’ expectations of 42.

“January data provided encouraging signs that the UK construction sector has exited its tailspin, and firms are becoming more hopeful that new projects will get back on track in 2026,” said Tim Moore, economics director at S&P Global Market Intelligence.

All sectors of the index recovered from December’s lows thanks to stabilising demand after Chancellor of the Exchequer Rachel Reeves’ budget on Nov 26. Total new work declined at the slowest pace in three months, helped by a public sector rebound and a boost in commercial sales enquiries.

Housebuilding, a priority for the Labour government which promised to deliver 1.5 million new homes, remains plagued by sluggish demand, weak client confidence and a lack of new project starts, making it the weakest construction sub-sector. However, S&P’s report pointed to signs of a turnaround, as it showed residential activity recovering from the Covid-19 era lows recorded last month.

Builders across sectors continue to struggle with cost pressures eating into their margins. Firms reported the sharpest increase in purchasing costs since September amid higher wages and raw material prices. These headwinds prompted construction companies to cut jobs for the 13th consecutive month.

UK private sector in best month since August 2024, PMI shows

The National Institute of Economic and Social Research forecast that the jobless rate would average 5.4 per cent this year, up from 4.8 per cent in 2025.

UK unemployment set to hit 11-year high in 2026, NIESR forecasts

The upturn matches an improvement in other business surveys including preliminary purchasing managers’ index data for January.

UK business sentiment rebounds in January, IoD says

Lloyds’ business barometer slipped to a net balance of +44 per cent in January from +47 per cent in December, driven by a 14-point drop in businesses’ net economic optimism to a one-year low of +28 per cent.

UK business confidence weakens as doubts grow over wider economy

Official consumer price inflation data for December - which covers a wider range of goods and services - rose to 3.4 per cent from 3.2 per cent.

UK shop prices rise at fastest pace in nearly two years

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Still, improving sentiment around investments and lower interest rates boosted optimism for the year-ahead. S&P’s confidence measure rose to the highest since May 2025, with almost 40 per cent of the firms surveyed predicting output will improve in the next 12 months. Just 17 per cent expect activity to fall. BLOOMBERG

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