Construction sector records surprise steep fall in activity ahead of Budget

UK construction activity has fallen unexpectedly and at the fastest pace for more than five years amid fiscal worries and rumoured tax hikes in the November Budget, according to new figures.

The latest S&P Global UK construction purchasing managers’ index (PMI) showed a reading of 44.1 in October, down from 46.2 in September and its lowest level since May 2020.

Most economists had been expecting activity to rise, with the consensus forecast for a reading of 46.7, according to Pantheon Macroeconomics.

The score has now remained below the neutral 50 point threshold, indicating that activity is contracting, for the 10th month in a row, which is the longest continuous decline since the 2008 financial crisis.

Civil engineering and housebuilding had the steepest rates of decline in activity, with the latter seeing the fastest contraction for eight months.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies reported another challenging month in October as the prolonged weakening of order books so far in 2025 resulted in the fastest decline in business activity for over five years.

“Reduced workloads were again widely attributed to risk aversion and delayed decision-making among clients, which contributed to a slower-than-expected release of new projects.

“Subdued demand in the wake of heightened political and economic uncertainty also led to the steepest drop in input buying since May 2020.”

With staff costs soaring, construction firms shed jobs at the fastest rate in just over five years in October, with workers not being replaced when they leave and fewer subcontractors being taken on.

Pantheon said there were now risks to fourth-quarter gross domestic product (GDP) forecasts from the construction activity decline.

Elliott Jordan-Doak, senior UK economist at Pantheon, said: “The construction PMI is one of the few areas where pre-Budget uncertainty is showing up, and October’s fall stands in contrast to the composite PMI, which increased.

“We take the mood music seriously here, as the plummeting PMI suggests that projects are being postponed ahead of the Budget.

“Accordingly, we see downside risks to our call for GDP growth in the fourth quarter.”

He said it was likely that the construction sector will “hold up better” than the PMI survey suggests.

“But cratering sentiment remains a warning that prolonged speculation about tax hikes has consequences,” he added.

In some bright spots of the survey, build cost inflation increased at the slowest pace for a year, while overall optimism edged up to its highest since July as the prospect of interest rate cuts helped boost demand projections.