According to S&P’s Global Construction Purchasing Managers Index (PMI), residential activity – with an index reading of 36 – was the weakest performing segment of the construction sector, with housebuilders commenting on unfavourable market conditions and headwinds from elevated borrowing costs.
Overall, the index fell from 39.7 in April to 38.2 in May, marking the 17th month in a row that construction activity has contracted.
As well as shrinking order books and economic turbulence, higher energy, fuel and transportation costs are reported to have led to the fastest pace of input price inflation since June 2022.
Meanwhile, supplier delays are the most widespread since December 2022. International shipping delays meant that suppliers’ delivery times lengthened for the third month.
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Steepest drop in new work
Total new orders across the construction sector decreased at a sharp and accelerated pace in May. Like the trend for output levels, the downturn in new business intakes was the fastest for six years.
Construction companies suggested that project delays, deferred investment decisions and general cutbacks to clients’ budgets had all resulted in fewer tender opportunities.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies reported a steep downturn in business activity during May, with the speed of contraction accelerating to its fastest for six years.
“Anecdotal evidence suggested that economic uncertainty and rising inflation in the wake of the Middle East conflict had triggered the steepest drop in new work since the beginning of the pandemic. Elevated borrowing costs were also reported to have impacted market conditions.
“Fuel surcharges and rapid increases in prices for energy-intensive raw materials continued to be felt across the construction supply chain.
“Concerns about a prolonged decline in construction order books, alongside unfavourable near-term UK economic prospects, weighed on business optimism in May. This index has fallen sharply since the start of 2026, and confidence levels are now almost as low as those seen ahead of last autumn’s Budget.”
Richard Pike, sales and marketing director at Phoebus Software, said that beyond the economic pressures, it was increasingly becoming a question of delivery.
He continued: “The government’s housebuilding ambitions risk looking like another broken promise unless the structural barriers holding back development are tackled with urgency.
“Development funding is more available, lenders are active, and conditions are improving – yet projects are still not progressing at the scale needed.
“As the OECD highlighted in its latest UK economic outlook, an overhaul of the National Planning Policy Framework is essential. Without meaningful planning reform, any recovery seems a long way off.”
