BCIS CapX provides a comprehensive, detailed and easy-to-use method of measuring cost movement for building and civil engineering. Widely used in the construction and infrastructure sector to help fairly allocate risk between the client and sub-contractors.
Published: 09/07/2026
Construction downturn eases but sector remains firmly in contraction
UK construction activity declined for the eighteenth consecutive month in June 2026, although both output and new orders fell at a slower pace than in May, according to the latest S&P Global UK Construction Purchasing Managers’ Index (PMI)(1).
The PMI, which tracks changes in the volume of business activity through a monthly survey of around 150 construction firms, registered 38.4 in June, up slightly from May’s six-year low of 38.2. A reading above 50 indicates growth in activity, while a reading below 50 signals contraction.
Total new business declined again in June, though the pace of deterioration was the slowest since March. Survey respondents cited fewer new build house sales, weak business investment spending and intense competition for new orders as key factors. Some firms noted improved opportunities to tender for defence and energy sector projects.
Dr David Crosthwaite, chief economist at BCIS, said: ‘The June PMI offers a slightly more encouraging picture than May, with both output and new orders declining at a slower pace. However, a reading of 38.4 is still firmly in contraction territory, and the index has pointed to falling construction activity in every month since January 2025.
‘House building and civil engineering remain the weakest parts of the market. House building activity fell at its sharpest pace in 2026 to date, reflecting subdued housing sales, elevated borrowing costs and squeezed consumer finances.
‘The civil engineering figure is particularly notable. A reading of 22.1 is not a softening of activity – it represents a sharp and rapid deterioration, bringing the sector to its weakest point since the height of the pandemic in April 2020. Given the scale of infrastructure investment commitments in the government’s pipeline, that gap between planned spending and activity on the ground is becoming increasingly difficult to ignore. Adding to that uncertainty is the question of where the money will come from to fund the government’s defence spending commitments, and which parts of the existing infrastructure programme may be scaled back or deferred as a result.
‘The easing of supply chain pressures and input cost inflation is a more positive development. However, confidence levels remain well short of historic trends, and the sector will need to see sustained improvement in new orders before any meaningful recovery can take hold.’
At a sector level, commercial construction was the best-performing category in June, registering an index of 41.5 and recording a slower rate of decline than in May. House building activity fell at its sharpest pace in 2026 to date, with an index of 35.9, while civil engineering recorded the most severe contraction of any sector, with an index of 22.1 – its weakest reading since April 2020. To put that in context, the sector has not seen a figure this low since construction sites were operating under pandemic restrictions. Lower activity levels were attributed to subdued housing market conditions, higher borrowing costs, elevated business uncertainty and delayed project starts.
Business optimism improved in June, recovering from the six-month low recorded in May. Twice as many firms (38%) expected an increase in activity over the year ahead as those forecasting a decline (19%). Positivity was linked to forthcoming public sector projects, greater infrastructure spending and the restart of delayed schemes. However, confidence remained considerably weaker than the long-run survey average.
Employment levels continued to fall in June, marking 18 months of sustained job shedding. Subcontractor usage also fell sharply, contributing to the fastest improvement in subcontractor availability since April 2025.
Input cost inflation eased to a three-month low in June, with around 53% of the survey panel reporting a rise in costs and only 1% reporting a decline. Higher raw materials prices, staff wages and transport costs were the most commonly cited factors. Supply chain pressures also moderated, with vendor delivery times lengthening to the smallest degree since March and survey respondents noting rising inventories among vendors and fewer instances of shipping delays.
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(1) S&P Global UK Construction PMI - here
