This marks the first contraction in UK construction activity after 10 months of expansion. Firms cited delays in decision-making by clients on major projects and general economic uncertainty as key factors weighing on activity to start the year. Looking at the breakdown, civil engineering activity (44.6) continues to lag while commercial construction activity (48.9) returned to contraction for the month. House building activity (44.9) fell for a fourth straight month, highlighting added concerns on overall sentiment. S&P Global notes that:
"UK construction output fell for the first time in nearly a year as gloomy economic prospects, elevated borrowing costs and weak client confidence resulted in subdued workloads.
"Output levels decreased across the board in January, with particularly sharp reductions seen in the residential and civil engineering categories.
"Construction firms noted the fastest fall in residential work for 12 months as market conditions remained somewhat subdued. Anecdotal evidence suggested that caution regarding demand for new projects was prevalent at the start of 2025, despite strong policy support for house building and hopes for a longer-term boost to supply via planning reform.
"The forward-looking survey indicators were also relatively downbeat in January. New orders decreased at the fastest pace since November 2023 amid many reports of delayed decision-making by clients. Reduced workloads, combined with concerns about the general UK economic outlook, led to a dip in business activity expectations to the lowest for 15 months.
"There was little respite on the supply front, as transport delays meant that vendor lead times lengthened to the greatest extent for two years. Demand for construction items softened again in January, but purchase price inflation was the highest since April 2023 as suppliers sought to pass on rising energy, fuel and wage costs."
This article was written by Justin Low at www.forexlive.com. Read More Details
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