Civil engineering and housing are driving sharp declines in construction output as shrinking order books force firms to cut staff, with developers awaiting the Autumn Budget to boost confidence.
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UK construction activity slumped again in October, with output contracting at the sharpest pace since May 2020.
The headline index fell to 44.1, down from 46.2 in September, marking a tenth consecutive month below the 50 growth threshold, according to the latest S&P Global UK Construction PMI.
Civil engineering recorded the steepest fall in activity (35.4), followed by housing (43.6), while commercial building (46.3) showed relative resilience.
Firms cited a lack of new work, client caution, and delays in project starts amid ongoing political and economic uncertainty.
Staffing levels also declined at the fastest rate, since August 2020, as contractors avoided replacing leavers, and demand for materials dropped sharply.
However, input cost inflation eased to a 12-month low, with improved supplier performance and shorter delivery times.
Despite weak order books, optimism edged up to its highest level since July, supported by hopes of lower borrowing costs and renewed investment.
Jordan Smith, regional director at Thomas & Adamson, part of Egis Group, said: “While uncertainty continues to weigh on client confidence and project pipelines, optimism has edged higher, reflecting the belief that lower borrowing costs and future infrastructure investment could start to turn sentiment around.
“The sector has shown resilience before, and with the right economic and policy support, there’s every reason to think it can do so again as we move towards 2026 with optimism.”
Kelly Boorman, national head of construction at RSM UK, commented that with the Autumn Budget approaching, speculation and uncertainty surrounding potential property tax changes are affecting industry sentiment.
“As such, we could see a sharper hit to activity in November if clarity around tax and planning reform doesn’t materialise,” she said.
“Delivering on the government’s 1.5 million new homes target and long-term growth hinges on the government’s approach to tackling fiscal constraints and planning bottlenecks, so clear policy direction will be key to restoring industry confidence and unlocking stalled development.”
According to the latest UK Market View by Mace Consult, however, the UK construction industry has seen its strongest output in almost three years, led by infrastructure and public non‑housing projects, with experts noting that the upcoming Budget presents a key opportunity to support further growth and confidence in the sector.
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With less than three weeks to go until the Autumn Budget, uncertainty and jitters are building across the industry.
Clive Docwra, managing director at McBains, said: “Many developers will be putting any plans on hold until after the chancellor delivers her Budget, while the industry will be looking for the speech to give further incentives to get Britain building.”
While developers like Barratt Redrow continue to report higher home completions, uncertainty persists across the sector, with others – including Vistry Group executives – saying they await “further clarity” on Whitehall’s plans for housebuilding.
For Julie Palmer, a managing partner at insolvency expert Begbies Traynor there continues to be a “cloudy haze” covering the housebuilding and construction sector, despite firms like Barratt Redrow delivering “shafts of sunlight through the gloom”.
“Barratt Redrow’s own performance highlights polarisation in the market between large national housebuilders and developers and SMEs, who may not have the headroom to soak up rising costs,” she said.
“This polarisation may be compounded if unpaid taxes are called in, potentially seeing firms requiring restructuring, refinance, negotiating Time to Pay agreements or an exit.”
The Autumn Budget is set to be announced on 26 November 2025.
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