Output stays in black but worries about economy dog firms’ confidence

Construction activity fell in December but remained in positive territory for the tenth month in a row, new figures have said.

The S&P Global UK Construction Purchasing Managers’ Index (PMI) showed a score of 53.3 in December, down from 55.2 in November. Any score above the 50 no change mark indicates growth.

Commercial activity was the fastest-growing area of the construction sector in December with a score of 55, followed by civil engineering with 52.9 – although both were down on the previous month.

Residential work was again the only category to register an overall decline in output during December with a score of 47.6 meaning the activity in the sector has now decreased for three consecutive months and the latest reduction was the fastest since June 2024.

Total new work also expanded at the slowest rate since last June while the report added: “Anecdotal evidence suggested that improving tender opportunities in the commercial building sector had been offset by cutbacks to residential development projects and a lack of new business to replace completed infrastructure work.

“Construction companies responded to weaker new order growth by reducing their input buying for the first time in eight months.”

The report said there was a decline in subcontractor activity for the fourth time in the past five months but the availability of subcontractors increased at its slowest pace since March 2023.

The PMI index, a key bellwether, said the impact of tax rises announced by chancellor Rachel Reeves in the October Budget continued to dampen the mood about prospects for the coming 12 months with optimism “still much weaker than seen in the first half of 2024”.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Concerns about the demand outlook weighed on construction sector growth expectations for 2025. Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.”

Kelly Boorman, national head of construction at RSM UK, said: “The latest fall was likely due to the spells of bad weather in the run up to Christmas, as well as the usual seasonal slowdown over the festive period, as reflected in the falls in commercial and civil engineering activity.

“Businesses are also starting to feel the impact of supply chain disruption after multiple significant company collapses in 2024, which has dampened market confidence and caused project delays, leaving many contracts in limbo.”

But she added: “We expect an uptick in activity in Q1 2025, following the recent publication of the National Planning Policy Framework and the incoming infrastructure strategy which is due to be published in the spring.”

And Max Jones, director in Lloyds’ infrastructure and construction team, said: “A fall in activity suggests that some firms continue to face challenging economic conditions, including inflation.”