Construction activity falls on slump in housebuilding amid ‘severe headwinds’

The biggest slump in housebuilding so far this year has seen activity in the construction sector pull back at the sharpest pace since June, according to a report.

The latest S&P Global UK construction purchasing managers’ index (PMI) showed a reading of 43.6 in October, down from 46.1 in September.

This is lower than the 46.5 expected by most economists and marks nearly two years running of contraction in the sector, according to the PMI.

Any reading above the 50 threshold indicates activity in the industry is increasing, while anything below means it is contracting.

Pressures in the housebuilding sector are seen as being behind the activity drop, which marks a setback after signs of stabilising in September, with rising inflation and borrowing costs impacting the industry.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Construction companies commented on severe headwinds in the house building sector from rising borrowing costs, weak consumer confidence and elevated economic uncertainty.

“However, there were reports of strong demand for data centre projects, alongside rising workloads in the energy and utilities sectors.

“Resilient infrastructure spending contributed to the slowest fall in civil engineering activity since May 2025.”

The downbeat reading comes despite the Government’s move in September to announce the launch of its new Your First Home scheme, which aims to give thousands of households in England a helping hand to take their first step on to the housing ladder and replace the previous Help to Buy initiative.

Eligible buyers will be able to purchase a new-build home using a deposit of at least 2.5% of the purchase price, a repayment mortgage from a participating lender and a government equity loan worth 20% of the purchase price, interest-free for five years.

Rising costs amid the Iran war are intensifying challenges for building firms, according to the report.

It found that input cost inflation ramped up sharply from the seven-month low seen in September, with the latest rise in purchasing prices the steepest since June.

Mr Moore said: “Faced with rising input price inflation, higher borrowing costs and reduced order books, construction firms were unsurprisingly cautious about the year ahead business outlook.

“The degree of optimism towards activity growth eased again in October and now sits at one of the lowest levels since the end of 2022.”