UK Building Sector Shows Signs of Recovery Amid Ongoing Job Losses

The UK construction sector has shown tentative signs of recovery as the pace of decline slows, particularly in housebuilding and civil engineering. However, the industry continues to grapple with persistent job losses and uncertainty among clients.

Key Takeaways

The construction slump is easing, but activity remains in contraction territory.
Housebuilding and infrastructure see slower declines, hinting at stabilisation.
Job cuts in the industry have persisted for nine consecutive months.
Companies report cautious client spending amid economic and policy uncertainty.

Sector Contraction Slows but Work Remains Below Neutral

The latest industry data revealed the UK construction purchasing managers’ index (PMI) improved to 46.2 in September, up from 45.5 in August. Although this marks the sector’s highest reading in three months, it remains below the critical 50.0 threshold that signals industry growth, meaning construction activity is still shrinking—just at a slower rate than in previous months.

Housebuilding and civil engineering both saw a reduced rate of decline, suggesting cautious optimism around these subsectors. Despite the overall negative trend since the start of the year, the recent data hints that the worst of the downturn may be passing.

Continued Decline in New Orders

Construction firms report that new business remains subdued, with incoming orders dropping for the ninth consecutive month. However, the pace of this decline was the slowest since early 2025, a minor positive for the sector. Economic uncertainty is prompting clients to delay or pause large expenditure projects, with many waiting to see the impact of the upcoming autumn Budget.

Companies note that energy security and infrastructure projects could offer lifelines in the near term, though widespread caution persists amid a sluggish domestic economy.

Persistent Job Cuts Create Uncertainty

Employment in the construction sector continues to fall, marking the longest run of job losses since the COVID-19 pandemic. Firms cite smaller workloads, hiring freezes, and decisions not to replace departing staff as main reasons for reduced headcounts.

Low business optimism and robust cost pressures compound the issue, contributing to declining employment levels. Some analysts caution that measures such as the PMI may reflect negative business sentiment rather than a fundamental further drop in activity. Nonetheless, ongoing speculation about government fiscal measures and delayed interest rate cuts are affecting the sector’s outlook.

Outlook: Cautious Optimism Ahead

Economists suggest that government investment initiatives and reforms focused on increasing housebuilding could support the sector and help reverse the downward trend. While the immediate outlook remains challenging, new opportunities in energy and infrastructure may provide a much-needed boost if policy and financial conditions improve.