UK Construction Sector Contracts Further in March 2025 Amid Rising Costs and Job Cuts
UK Construction Sector Contracts Further in March 2025 Amid Rising Costs and Job Cuts
the UK’s construction industry continued to face significant challenges, as evidenced by the latest data from the S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI). The PMI registered at 46.4, indicating a contraction in the sector for the third consecutive month. Although this figure represents a slight improvement from February’s 44.6, it remains below the neutral threshold of 50.0, signaling ongoing declines in construction activity.
Civil Engineering Leads Decline
Among the various subsectors, civil engineering experienced the most pronounced downturn, with activity levels plummeting to 38.8—the steepest decline since October 2020. This sharp contraction is largely attributed to delays in new project decision-making and a dwindling pipeline of infrastructure projects.
Residential and Commercial Building Activity
Residential construction also faced continued challenges, recording an index of 44.7. While this marks a slight improvement over February’s figures, the sector remains in negative territory, reflecting weak demand and ongoing market uncertainties. Commercial building activity declined moderately, with an index of 47.4, marking its fastest rate of contraction since January 2021.
Employment and Cost Pressures
The persistent downturn in construction activity has had a notable impact on employment within the sector. March saw the sharpest reduction in employment levels in nearly four and a half years, as companies implemented hiring freezes and opted not to replace departing staff. This trend is driven by a combination of reduced order volumes and escalating payroll costs, particularly in light of increased employer social security contributions.
Business Confidence and Future Outlook
Business optimism within the construction industry has also been affected, with confidence levels dropping to their lowest since October 2023. Only 40% of surveyed firms anticipate output growth over the next year. Despite some optimism surrounding opportunities in the renewable energy sector and potential infrastructure projects, the overall sentiment remains cautious.
