The longest contraction in almost 20 years! The UK construction PMI shrank for 12 consecutive months, but 2026 may be warm

The Zhitong Finance App learned that an industry survey released on Wednesday showed that the output of the British construction industry recorded 12 consecutive months of contraction in December. This is the longest contraction in nearly 20 years, but the survey showed signs of optimism about 2026. The S&P Global Construction Purchasing Managers' Index (PMI) recorded 40.1 in December, only slightly above the five-and-a-half-year low of 39.4 in November.

The decline extended the industry's downturn to 12 months, the longest continuous contraction since the 2007-09 global financial crisis. Wednesday's reading was below the median value of 42.5 predicted by economists' surveys, and also below the 50-level line that distinguishes growth and contraction.

Tim Moore, financial intelligence and economics director of S&P Global Markets, said, “British construction companies once again reported a severe operating environment and a decline in workload in December, but the pace of decline was slower than the five-and-a-half-year record seen in November.”

Moore said, “Many companies mentioned weak demand and weak customer confidence. Although budget-related uncertainties have been removed, delays in spending decisions are still mentioned among the reasons for weak sales channels at the end of the year.”

Some recent business surveys have revealed similar concerns about demand, investment, and recruitment. Earlier, Chancellor of the Exchequer Rachel Reeves released her second budget of the year in late November, which included a £26 billion (approximately $35 billion) tax increase plan, although implementation of most of these measures has been delayed.

The decline in output in the commercial sector in December hit the fastest record in more than five and a half years. Although the downturn in the civil engineering sector eased somewhat, it was still the weakest performing category in December.

The residential construction activity sub-index fell to 33.5, the lowest reading since May 2020 (when construction work stopped due to the lockdown during the COVID-19 pandemic). The British government is currently trying to speed up the pace of housing construction.

However, as borrowing costs are expected to fall and uncertainty in the Reeves budget is removed, companies have shown signs of confidence in the outlook, and business activity expectations for the next 12 months have reached their highest level since July.

Increased infrastructure spending and less inflationary pressure have also raised hopes that the situation will improve. The total number of new orders and employment numbers declined in December, but the decline was less than in November.

Industry-wide PMI — including the previously released December service and manufacturing reports and construction data — rose slightly to 50.4 from 50.1 in November.