The UK construction industry experienced a sharp contraction in January, marking the end of a 10-month expansion streak. The construction PMI fell to 48.1 from 53.3 in December, signalling a downturn across all three construction categories-residential, commercial, and civil engineering. Delayed client decisions, economic uncertainty, and subdued market conditions in the housing sector contributed to this decline. House building (44.9) saw its steepest drop in a year, while civil engineering (44.6) was hit by adverse weather conditions. Commercial activity (48.9) also shrank, reflecting a lack of tenders and client hesitancy.

Order books weakened for the first time in 12 months, and purchasing activity fell for a second consecutive month. Rising cost pressures compounded these challenges, with input costs surging at the fastest rate since April 2023, driven by energy, transport, and labour expenses. Sub-contractor charges also soared to a 21-month high despite reduced usage. Employment levels dipped marginally.

Although 38 percent of firms anticipate business growth, optimism is at its lowest since October 2023, with concerns over sales pipelines and the post-budget economic climate weighing on confidence. The latest update leaves the UK RPI and RPI-P at minus 19, meaning that economic activities are lagging behind market expectations of the UK economy.

The Construction Purchasing Managers' Index (PMI) provides an estimate of business activity in the UK construction sector for the preceding month based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 170 construction companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional and industry contribution to gross domestic product. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

The survey is based on techniques successfully developed in the USA over the last 60 years by the National Association of Purchasing Management. It is designed to provide one of the earliest indicators of significant change in the economy. The data collected are not opinion on what might happen in the future, but hard facts on what is actually happening at 'grass roots' level in the economy. As such the information generated on economic trends pre-dates official government statistics by many months.