January saw the slowest contraction in seven months as last year’s sustained downturn in construction output, eased with according to the latest  S&P Global UK Construction Purchasing Managers’ Index.

The index for construction output last month stood at 46.4, the highest since June 2025 and a sharp rise from the five-and-a-half-year low of 40.1 seen in December.

The figure is still well below the 50.0 no-change value for construction output and the thirteenth month in which the index has been in negative territory.

Commercial output improved markedly in January, rising from an index of 42 in December to 48.4

But Tim Moore, economics director at S&P Global Market Intelligence, said January’s data provided “encouraging signs that the UK construction sector has exited its tailspin”.

All three sub-sectors recorded weaker rates of contraction than those seen in December, with the commercial sector the strongest performer, rising to an index of 48.4 from 42 seen in December.

Civil engineering activity also saw a significant improvement, rising to 40.6 from last month’s 32.9, while housebuilding jumped from 33.5 to 39.3.

Respondents to the monthly survey suggested investment had been helped by clarity provided by November’s Budget, which came after a prolonged period of uncertainty, and greater confidence in the commercial market.

While the continued weakness of the housebuilding sector was blamed by some survey respondents on a lack of new residential schemes and subdued demand, the total level of new work decreased across all sectors at the slowest rate for three months.

Business confidence also rebounded from a 35-month low seen in November, with 38% of respondents in January expecting a rise in output volumes over the next 12 months against 17% foreseeing a reduction. 

Although confidence is still well below the survey’s long-term average, this is the highest level of optimism since May 2025, with respondents pointing to lower borrowing costs, greater infrastructure spending and hopes of a recovery in the housing market as reasons for the uptick.

Moore said surveyed companies appeared to be more hopeful that projects will get back on track in 2026.

“Construction companies noted subdued underlying demand due to fragile client confidence and elevated risk aversion, but there were some reports of improving investment sentiment and greater sales enquiries at the start of the year. As a result, business activity expectations rebounded to an eight-month high, while the pace of job losses moderated,” he said.