The UK construction sector faced a downturn in February, with activity falling at its sharpest pace since the early days of the pandemic. The PMI fell to 44.6, a near five-year low, reflecting a deepening downturn in housing and civil engineering projects. Residential construction (39.3) bore the brunt of the decline, marking its worst contraction since 2009 outside of pandemic disruptions. Civil engineering (39.5) was similarly weak, while commercial construction (49.0) showed relative resilience.

A downturn in demand intensified, with new orders falling the fastest since May 2020. High borrowing costs, client uncertainty, and investment cutbacks left businesses scrambling for work. Job cuts followed, with firms opting not to replace departing staff, resulting in the sharpest employment decline since late 2020.

Despite easing supplier constraints, cost pressures soared, with inflation hitting a near two-year high. Rising expenses for materials, energy, and wages squeezed margins. Optimism for the year ahead remains fragile39 percent of firms anticipate recovery, but risk aversion and subdued spending mute confidence. The latest updates leave the RPI at 39 and the RPI-P at 29, meaning that economic activities remain well ahead of 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.