Published: September 21, 2025
September has brought a mix of modest optimism and deepening caution for the UK construction sector. While the second quarter delivered measurable growth in output, the underlying indicators for Q3 — from new orders to PMI readings — signal an industry still facing structural headwinds. At Leading Edge, we’ve reviewed the latest data from the ONS, S&P Global, CPA, and other trusted sources to bring you a snapshot of what’s happening and what it means.
Q2 Construction Output Grows — But Caution Persists
According to the ONS July construction output bulletin, total construction output increased by 0.6% in the three months to July 2025, with growth led by private housing RMI (+3.8%) and infrastructure new work (+2.1%). New work grew modestly in July (+0.2%), though repair and maintenance remained flat.
However, the volume of new orders fell by 8.3% year-on-year, reflecting a continued dip in client confidence, especially in commercial and public sector schemes. Public housing new orders dropped by a sharp 27.5%, and infrastructure new orders fell by 17.8% — despite their stronger showing in current work output.
Construction PMI Points to Longest Contraction Since 2020
The S&P Global UK Construction PMI for August fell to 44.3, down from 47.0 in July — marking the eighth straight month of contraction, and the steepest since May 2020.
As reported by The Guardian, housebuilding and civil engineering continued to shrink, while commercial work showed greater resilience. Subcontractor availability improved slightly, and purchasing price inflation eased — positive signals, but more reflective of weaker demand than robust recovery.
Materials & Cost Pressures Easing, But Still Volatile
The latest building materials commentary shows mixed signals. Brick deliveries were up 12.8% in June, suggesting sustained demand from residential schemes. In contrast, concrete block deliveries fell 4.6%, mirroring a slowdown in infrastructure groundwork and some commercial sites.
On the macro level, UK inflation held steady at 3.8% in August, with energy and labour costs continuing to affect supply chain pricing. While some input inflation is softening, the industry continues to grapple with tight margins and price uncertainty.
Housing Outlook: Mixed Fundamentals
Despite PMI contraction in housing activity, there are signs of latent demand waiting for economic triggers. The end of summer brought slightly improved mortgage rates, and developers are hoping for further reductions in interest rates in Q4, which could unlock more first-time buyer activity.
However, planning delays, build cost inflation, and flatlining public sector investment are still hampering delivery. Commentary from PwC noted that many developers are “cautiously watching the economy, not pushing the button on new schemes just yet.”
Infrastructure Holding Steady but Facing Delays
Infrastructure continues to prop up construction growth, but signs of delay are building. Despite output rising 2.1% in Q2, ONS data shows infrastructure new orders have dropped substantially. Rising project costs, skills shortages, and re-tendering are delaying start dates — especially in local transport and energy frameworks.
At the same time, policy uncertainty following local elections is slowing green infrastructure planning decisions.
Labour Market Tightness & Planning Constraints
The Bank of England’s Agents’ Summary reinforces industry feedback around ongoing skills shortages — particularly for experienced trades and site supervisors — and notes that planning system delays continue to push back development starts.
Although recruitment activity is improving marginally in some regions, the drag effect of bureaucracy remains a barrier across both residential and non-residential schemes.
Final Thoughts from Leading Edge
This month’s data suggests that the construction sector is still in a holding pattern. Yes, Q2 output was up, and some material cost pressure is easing — but overall market sentiment remains subdued, and longer-term planning and investment decisions are still being deferred.
At Leading Edge, we help manufacturers, contractors, and suppliers understand these signals in the context of their market — identifying where demand is shifting, which sectors to prioritise, and what new barriers may be emerging.
Contact us if you’d like to explore how we can support your strategy for the remainder of 2025.
Sources: ONS, S&P Global, The Guardian, PwC, Bank of England, GOV.UK
Written by the Leading Edge team – September 21, 2025
