Buyers Face Surge in Construction Costs
The construction sector in the UK faces intensified challenges as buyers confront a surge in construction costs. The S&P Global UK Construction Purchasing Managers’ Index registered a slight increase to 45.6 in March, up from 44.5 in February, yet it has remained below the neutral threshold of 50.0 for the 15th consecutive month. This index reflects a persistent downturn in supplier performance, compounded by increasing costs.
Decline in Construction Output
Residential construction saw the most significant decline, with its index plummeting to 38.2. In comparison, civil engineering and commercial construction reported better performance, with indices of 44.8 and 47.1, respectively. All three sectors, however, experienced slower rates of contraction than the previous month.
Factors Contributing to Rising Costs
Nearly 48% of construction firms reported rising cost burdens in March. In contrast, only 3% noted any decrease. Consequently, the seasonally adjusted Input Prices Index indicated a rapid increase in cost inflation, the highest level observed since November 2022.
- Increase in average costs: 48% of firms
- Decrease in costs: only 3% reported
- Input Prices Index: highest since November 2022
Supplier Challenges and Shipping Delays
March data revealed lengthened lead times among suppliers for the first time since July 2025. This situation arises partly due to prolonged international shipping times and tighter availability of raw materials, particularly resins. As a result, construction companies noted significant challenges in supply chain performance.
Outlook and Business Sentiment
Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted that construction activity has decreased, led by a notable decline in residential work. Despite some resilience in the commercial and civil engineering segments, a downturn in total new orders was observed. This downturn is one of the sharpest in six years.
Survey participants expressed concerns over consumer confidence and delayed investment decisions, especially following geopolitical tensions in the Middle East. As a consequence, construction firms have adjusted their output growth forecasts, reflecting the challenging near-term outlook.
Inflation Pressures and Future Challenges
Growing inflationary concerns, bleak economic prospects, and higher borrowing costs were key issues highlighted by respondents. Escalating transport costs and fuel surcharges further contributed to increased input cost inflation, marking the largest month-on-month rise noted in 30 years of data collection.
The construction industry, fraught with rising costs and reduced output, faces a critical period ahead as companies strive to navigate through these changing dynamics.
