Last month marked the eleventh consecutive month with a PMI below 50, and the steepest contraction since May 2020, so at 39.4 it’s no surprise we are still in contraction territory. The sector continues to operate under significant pressure.
The (long anticipated) Budget offered construction firms some grounds for cautious optimism, particularly in areas like workforce development, investment incentives and infrastructure support. But the underlying reality remains the same: rising labour costs, ongoing planning delays, global headwinds and the potential dampening effect of a mansion tax are still weighing heavily on sentiment. Core construction activity continues to be slow, and with weak demand and a thin pipeline of new projects, any improvement is likely to be slow and steady.
Beyond immediate construction activity, the sector faces growing structural pressures that continue to constrain growth. The Renters Reform Bill and extra taxes on private landlords are adding uncertainty to residential investment, while rising compliance and licensing costs squeeze already-tight margins. Rapid increases in the National Minimum Wage (up around 17–18% over two years versus roughly 12% for median pay) is also narrowing the gap with pay for skilled trades and pushing wage costs higher. Together, these pressures make long-term planning, recruitment and retention increasingly difficult for firms.
"Thames Water’s recent announcement of £20.5 billion and OGEM’ £28billion investment over the next five years is welcome news and will help drive growth in infrastructure. However, our clients consistently tell us is that stability, clarity, and predictability in policy are essential. Construction companies, investors and lenders plan on a three, to five year horizon, yet changes introduced in a single Budget can recalibrate the economics of a project overnight."
As we move into the final stretch of the financial year, firms are still looking for the certainty that enables long-term investment. The sector has shown its resilience time and again, but it can only convert that resilience into growth when operating in a stable environment.
