The construction sector saw a loss of momentum in December according to the latest PMI data.

As 2024 came to an end, total business activity expanded at the slowest pace since last June, while new order growth moderated for the third month running.

The headline S&P Global UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index tracking changes in total industry activity – registered 53.3 in December, down from 55.2 in November and the lowest for six months.

But the index has been above the crucial 50.0 no-change value since March 2024 with the latest reading still signalling an upturn in overall construction output.

Commercial activity was the fastest-growing area of the construction sector in December (index at 55.0), followed by civil engineering (52.9).

But both categories saw a slowdown in the rate of business activity expansion since November.

Residential work was again the only category to register an overall decline in output during December (47.6).

House building activity has now decreased for three consecutive months and the latest reduction was the fastest since June 2024.

Survey respondents noted that subdued demand conditions, elevated borrowing costs and weak consumer confidence had all weighed on activity.

Mirroring the trend for output volumes, total new work also expanded at the slowest rate since last June.

Anecdotal evidence suggested improving tender opportunities in the commercial building sector had been offset by cutbacks to residential development projects and a lack of new business to replace completed infrastructure work.

Construction companies responded to weaker new order growth by reducing their input buying for the first time in eight months.

Looking ahead, around 48% of the survey panel predict a rise in output over the course of 2025, while only 15% forecast a decline.

The degree of positive sentiment picked up sharply since November, but it was still much weaker than seen in the first half of 2024.

While construction firms typically commented on optimism linked to long-term business expansion plans, many also cited worries about the general UK economic outlook and tighter budgets for capital spending.

Tim Moore, economics director at S&P Global Market Intelligence, said: “December data highlighted a loss of momentum for construction output growth, with all three main categories of activity posting weaker performances than in the previous month.”

 He added: “Although confidence recovered after a post-Budget slump during November, it was still much weaker than in the first half of 2024.

“Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy."

Brian Smith, head of cost management at AECOM, said the sector was starting 2025 in a brighter place than a year ago, but challenges still remained.

He said “Despite output growth easing to six-month low, the construction industry has still finished 2024 on solid footing.

“As we enter the new year, the positivity around sentiment in the last half of 2024 should result in growth in construction output in 2025.

“Contractors are encouraged but will want to see how the government’s plans – including changes to National Planning Policy Framework (NPPF), increases in capital spending and a revised industrial strategy – can support the industry.

“The outlook looks brighter than this time last year but there remain challenges, with interest rates expected remain higher for longer, the malaise in the wider economy, changes to safety building regulations and persistent skills shortages that contractors need to solve whilst maintaining delivery.”