Britain's construction sector showed signs of recovery in January, with a key industry measure improving to 46.4 from December's five-and-a-half-year low of 40.1. The S&P Global purchasing managers' index (PMI) delivered its best reading since last June, beating economists' expectations of 42. But the sector remains in contraction, as any reading below 50 indicates declining activity, and housebuilding continues to struggle.
The improvement signals what Tim Moore, economics director at S&P Global Market Intelligence, described as an exit from the sector's «tailspin». He said: «January data provided encouraging signs that the UK construction sector has exited its tailspin, and firms are becoming more hopeful that new projects will get back on track in 2026.»
Business optimism reached its highest level since last May. Companies reported a gradual turnaround in sales pipelines and greater enquiries, with expectations for business activity rebounding to an eight-month high. The pace of job losses also moderated, though the sector has now shed workers for 13 consecutive months.
Challenges remain
Despite the improved sentiment, construction companies face ongoing headwinds. Moore noted: «Construction companies noted subdued underlying demand due to fragile client confidence and elevated risk aversion, but there were some reports of improving investment sentiment and greater sales enquiries at the start of the year.»
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, cautioned that recovery would be slow. «Ultimately, we expect output in the construction to rise only slowly over the coming year, as the [Bank of England's] Monetary Policy Committee reaches the end of its cutting cycle and borrowing costs remain high,» he said. «The Government prioritising welfare spending over investment also means builders will have few tailwinds for activity in 2026.»
Housebuilding under pressure
Housebuilding remained the weakest segment of the construction sector, though its decline eased to the slowest pace in three months. Builders continue to grapple with rising costs from last year's national insurance contribution hike and minimum wage increases, adding pressure to already tight material and wage bills.
Note: This article was created with Artificial Intelligence (AI).
