UK Construction and Law
Construction output falls again and house building drops to 37.6
By Staff Writer | 5 September 2026
The headline index slipped to 44.3 in August, a twentieth month below the no change mark. Housing was the only sub-sector contracting faster than in July. Input cost inflation, at least, eased to a six month low.
The seasonally adjusted total activity index for UK construction registered 44.3 in August 2026, down from 44.7 in July. Any reading below 50.0 means a fall in activity on the month before, and the index has now been below that mark for twenty consecutive months. Responses were collected between 12 and 27 August from a panel of around 150 construction companies stratified by workforce size.
All three sub-sectors fell. Residential activity registered 37.6, a sharper contraction than anywhere else in the survey and the only one of the three moving in the wrong direction against July. Commercial activity registered 47.8, its slowest rate of decline since January. Civil engineering registered 40.5, its least marked fall since March. Respondents pointed to subdued demand and fewer new projects, house building starts in particular.
The parts that are not getting worse
Three readings run against the headline. New order intakes fell, but at only a modest rate and the slowest since September 2025, with respondents citing support from transport infrastructure work and pockets of activity in data centre roll outs and energy projects. Employment fell again, but the rate of job shedding was the smallest since February, and subcontractor usage rose for the first time in just under two years. Input price inflation moderated to its lowest for six months, with some reports of more competitive pricing among suppliers, and rates charged by subcontractors increased at the slowest pace since March.
Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the construction sector.
Tim Moore, Economics Director at S&P Global Market Intelligence
Against that, purchasing activity fell sharply and faster than in the previous survey period, and higher fuel costs, transportation bills and raw material prices were still pushing purchasing expenses up sharply even as the overall rate of inflation eased. Delivery times were broadly stable, with a number of respondents reporting longer international shipping times.
What a claims practitioner should take from it
Subcontractor usage rising for the first time in nearly two years, while subcontract rates increase at the slowest pace since March, is the combination that produces disputes. It describes a market where main contractors are placing more work down the chain into a supply base that has lost its pricing power.
The forward looking numbers are worth reading precisely rather than as a headline. Around 38 per cent of the panel anticipate an expansion of output over the coming year and 20 per cent forecast a downturn, so the balance is positive. But the degree of optimism eased from July, which had been a five month high, and remains much weaker than the historic trend for this survey. Respondents named subdued client confidence, uncertain domestic economic prospects and elevated borrowing costs alongside the geopolitical position, with some noting hopes of a turnaround in tender opportunities, especially for commercial work.
One caution on the arithmetic. The headline is a diffusion index tracking the direction of change against the previous month, not the level of output. Twenty months below 50.0 does not mean twenty months of accelerating decline; it means twenty months in which more of the panel reported less work than reported more. A reading of 44.3 after 44.7 is a slightly faster monthly fall from an already reduced base.
Housing at 37.6 is the number to carry into a September workload forecast. Everything else in this release is either flat or improving at the margins.