May has been a month of cautious optimism for the UK construction industry. While certain sectors show signs of recovery, challenges such as rising costs, supply chain disruptions, and policy uncertainties continue to impact the market. Here’s an overview of the key developments shaping the industry this month.
Construction Output: Modest Growth Amidst Challenges
The latest data from the Office for National Statistics (ONS) indicates that construction output grew by 0.5% in March 2025. This follows a revised increase of 0.2% in February and a 0.3% decrease in January. Despite this growth, total construction output showed no change (0.0%) in Q1 2025 compared to Q4 2024, with new work increasing by 0.9% and repair and maintenance falling by 1.2%.
The Construction Equipment Association (CEA) reports that sales of construction and earthmoving equipment continued on an upward trend in March, with sales 11% above March 2024. However, the Purchasing Managers Index (PMI) for April fell to the lowest level seen in five years at 44.6, indicating a contraction in the sector.
Housing Sector: Slow Recovery Continues
The residential construction sector continues to face challenges. According to a report by Research and Markets, the UK’s residential construction industry is projected to grow at a CAGR of 5.3% between 2025 and 2034, driven by housing shortages and the Build-to-Rent boom. However, high mortgage rates and economic uncertainties continue to hinder rapid recovery.
Commercial and Infrastructure Projects: Mixed Signals
The commercial sector remains subdued, with the S&P Global UK Construction PMI indicating a decline in activity for the fourth consecutive month in April. The pace of decline accelerated to its fastest since May 2020.
On the infrastructure front, the Construction Leadership Council notes that private housing and infrastructure new work rose by 2.3% and 2.5%, respectively, in March 2025. However, major infrastructure projects like HS2 and Hinkley Point C have not offset delays and cancellations by cash-strapped local councils to roadwork projects, as reported by Global Cement.
International Trade and Supply Chain Concerns
The construction industry faces new challenges following the U.S. administration’s imposition of tariffs: a 10% levy on most British imports and 25% on cars, steel, and aluminum. These tariffs are expected to impact UK exporters of construction materials, particularly in the steel and aluminum sectors.
The uncertainty surrounding these tariffs necessitates that construction contracts account for potential price fluctuations and supply chain disruptions. Stakeholders are advised to develop contingency plans to mitigate these risks.
Industry Outlook: cautious optimism
Despite the challenges, the industry shows signs of cautious optimism. The Royal Institution of Chartered Surveyors (RICS) reports that expectations for the next twelve months remain positive but have been slightly scaled back, with infrastructure projected to lead sector growth.
However, the Construction Equipment Association (CEA) warns of potential risks emerging in the global economy, including the threat of low-cost, CO₂-intensive imports from countries like Türkiye, which could impact the UK’s supply chains and growth.
Final Thoughts from Leading Edge
The UK construction industry stands at a crossroads, balancing modest growth with significant challenges. While certain sectors show resilience, the overall outlook remains cautious. At Leading Edge, we continue to monitor these developments closely, providing our clients with the insights needed to navigate this complex landscape.
Sources: ONS, CEA, RICS, S&P Global, Research and Markets, Construction Leadership Council, Global Cement
