Joe Sullivan, partner at MHA, the accountancy and advisory firm comments on today's S&P construction PMI data:
While the December construction PMI has edged from November’s five-and-a-half-year low, it remains firmly in contraction territory and still well below the all-important 50 mark. This is hardly surprising, as all the difficulties faced for much of 2025 are very much still present. The sector has struggled to gain momentum, with the PMI staying below 50 for the past twelve months, a marked contrast to September 2024 when it peaked at 57.2.
These figures will scarcely come as a surprise to many in the sector, as economic challenges have persisted throughout much of the year. This is heightened in December with very little money coming in for contractors, as there is minimal activity for nearly three weeks and poor weather can hinder the early stages of construction.
For the housing market, the last quarter of the year tends to be a busy season as buyers look to be in new homes before Christmas. However, this year, the speculation and uncertainty surrounding a very late Budget meant that buyers were cautious about home purchases and completions underwhelmed.
Although with interest rates falling and the Budget now settled, there is hope that the first quarter of the year will see increased activity. Yet, for those businesses surviving on razor-thin margins, the end of January traditionally spells real problems with reduced cash remittances from December activities combine with tax and other lumpy outgoings, meaning we could expect further administrations and restructurings.
There are, however, glimmers of hope on the infrastructure side as the government’s decade-long Infrastructure Strategy should help to kickstart activity, provide much-needed investment, and create jobs.
In addition, the acceleration of the return to the office trend post pandemic should help to support the commercial property sector, particularly in major hubs across the country. Last year, the City of London Corporation saw an unprecedented surge in skyscraper applications, reflecting the rising demand for high-quality office space in the city, where some commentators are forecasting that all such space will be taken by 2028.
"While significant challenges remain, there is some cautious optimism that the construction sector will return to growth during this year."
