Story perspectives

UK Construction Activity Declines Amid Rising Costs and Indecision

2/7/2025

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Summary

UK Construction Decline

UK construction activity contracted in January 2025, with the S&P Global PMI falling to 48.1 from 53.3.
All sectors, including residential (44.9) and civil engineering (44.6), experienced reduced output amid client indecision.
Input costs reached a 21-month high due to rising energy and labor expenses.
New orders declined for the first time in a year, and business optimism dropped to its lowest since October 2023.

Summary

Bank of England Cuts

The Bank of England reduced interest rates to 4.5% due to a negative economic outlook, lowering 2025 growth forecasts to 0.75%.
Inflation is projected to peak at 3.7% by autumn, heightening cost-of-living concerns.
Business confidence has dropped, with nearly 40% of firms increasing prices amid tariff anxieties.
New business creation declined by 8.5% in Q4 2024, the lowest since 2017, indicating economic challenges.
The construction sector anticipates improved confidence and investment from the rate cut, despite existing hurdles.

History

Historical Context

UK construction activity contracted in January 2025, echoing the 2008 financial crisis's impact on the sector. During that time, uncertainty led to project delays and reduced investments. Today, rising costs and client indecision mirror past challenges, highlighting the cyclical nature of economic downturns in construction.

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UK Construction Decline

UK construction activity contracted in January 2025, with the S&P Global PMI falling to 48.1 from 53.3.
All sectors, including residential (44.9) and civil engineering (44.6), experienced reduced output amid client indecision.
Input costs reached a 21-month high due to rising energy and labor expenses.
New orders declined for the first time in a year, and business optimism dropped to its lowest since October 2023.

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