Business activity has declined for the first time since February 2024, according to the latest PMI data.

All three categories of construction work saw a reduction in output during January, ending a 10-month run of sustained expansion.

Shrinking order books and rising cost pressures contributed to the weakest business activity expectations since October 2023.

At 48.1 in January, down sharply from 53.3 in December, the headline seasonally adjusted S&P Global UK Construction Purchasing Managers’ Index (PMI) – an index tracking changes in total industry activity – registered below the 50.0 no-change threshold for the first time since February 2024.

Construction companies cited delayed decision-making by clients on major projects and general economic uncertainty had weighed on business activity at the start of 2025.

A number of firms also commented on the impact of subdued market conditions in the residential building sector.

Latest data showed that house building (index at 44.9) decreased for the fourth successive month and at the fastest pace since January 2024.

Civil engineering activity (44.6) declined at a relatively sharp rate, although this partly reflected disruptions from unusually wet weather at the start of the year.

Meanwhile, output in the commercial construction category also returned to contraction in January (48.9). This was linked to a lack of tender opportunities and a reluctance among clients to commit to new projects.

January data pointed to a decline in incoming new work for the first time in 12 months.

Although only modest, the rate of contraction was the steepest since November 2023.

Anecdotal evidence suggested that a lack of confidence among clients and worries about the UK economic outlook had contributed to fewer sales enquires.

Purchasing activity decreased for the second month in a row, reflecting weak order books and a lack of new work to replace completed projects.

Despite softer demand for construction products and materials, the latest survey indicated the steepest rise in input costs since April 2023.

Construction companies noted that suppliers had sought to pass on rising energy, transportation and staff costs. Vendor performance deteriorated to the greatest extent for two years, which was partly linked to shipping delays.

Tim Moore, Economics Director at S&P Global Market Intelligence, said: “UK construction output fell for the first time in nearly a year as gloomy economic prospects, elevated borrowing costs and weak client confidence resulted in subdued workloads.

“Output levels decreased across the board in January, with particularly sharp reductions seen in the residential and civil engineering categories.

“Construction firms noted the fastest fall in residential work for 12 months as market conditions remained somewhat subdued. Anecdotal evidence suggested that caution regarding demand for new projects was prevalent at the start of 2025, despite strong policy support for house building and hopes for a longer-term boost to supply via planning reform.

“The forward-looking survey indicators were also relatively downbeat in January. New orders decreased at the fastest pace since November 2023 amid many reports of delayed decision-making by clients.

“Reduced workloads, combined with concerns about the general UK economic outlook, led to a dip in business activity expectations to the lowest for 15 months.”

Brian Smith, head of cost management and commercial at AECOM, added: “A winter slowdown is unsurprising given the broader economic mood but confidence will need to improve quickly if the sector is to regain some of 2024’s momentum and deliver on the government’s growth agenda.

“After a sobering start to 2025, firms will be hoping to see further cuts to interest rates that encourage clients to green-light projects and unleash more private investment throughout the year.

“That said, contractors’ growth prospects are good this year, with pipelines suggesting there is sufficient work to go around.

“The speed of delivery though could be challenged their willingness to take on significant amounts of new work given the volatility of recent years and long-standing challenges around labour availability.”