UK building companies have suffered a poor start to the year, with activity contracting for a fourth month in a row in April as new work dried up while cost pressures remained high, according to an industry survey.
Construction firms continued to struggle after two years of depressed activity that industry executives had expected would end with Labour’s election victory last July.
A bounce back in the final three months of 2024 fizzled out as the outlook for the sector became clouded by political uncertainty and rising costs.
Concerns about the impact of Donald Trump’s import tariffs held up decision-making in the commercial sector, while delays in Whitehall over what large-scale construction projects to support before the government spending review due on 11 June reduced activity in civil engineering, industry experts said.
S&P Global said its construction purchasing managers’ index edged slightly higher to 46.6 from 46.4 in March but remained well below the 50 mark that separates growth from contraction.
The report said: “Construction companies widely noted that heightened business uncertainty and worries about the broader UK economic outlook had weighed on client demand.”
Housebuilding activity declined but at a slower rate than other sectors.
Tim Moore, an economics director at S&P Global Market Intelligence, said: “Commercial construction was a weak spot and lost momentum since March.
“Output decreased at the fastest pace for nearly five years amid reports of greater risk aversion among clients and a wait-and-see approach to major spending decisions.”
He said survey respondents commented on rising prices paid for a range of raw materials, as well as efforts by suppliers to pass on greater payroll costs.
Companies said they expected an improvement in the year ahead, “with a number of survey respondents citing the prospect of a turnaround in workloads across the residential building segment”.
According to industry figures from the data provider Glenigan, a recovery in housebuilding is already under way. It said that residential projects under £100m in size were 24% higher in the three months to April than in the preceding quarter.
Private housing construction activity rose by 22% on a quarterly basis and 29% when compared with the year before.
Social housing construction activity grew by 29% from the previous quarter but was only 3% higher than the same point in 2024.
after newsletter promotion
Brian Smith, the head of cost management and commercial at the engineering company AECOM, said he expected to see activity and order levels continue to recover through the summer.
He said a lack of clarity about how major projects will be funded remained an issue that ministers needed to resolve.
Smith added: “Next month’s spending review is a real opportunity for policymakers to set out a clear roadmap for public-private partnerships that draw in private investment to provide the much-needed backing for large-scale projects.”
In the eurozone, the construction sector also remained in decline in April, while the pace of contraction slowed.
The eurozone construction PMI from Hamburg Commercial Bank showed a rise in the headline index to 46 in April from 44.8 in March.
New orders fell at a slightly slower rate and many companies cut jobs and purchasing. Price pressures picked up to a 15-month high, although they remained well below the long-run average.
