The headline construction PMI for June increased slightly to 48.8, up from 47.9 in May, according to the latest PMI data by S&P and CIPS.

Housing activity was the main contributor to the slight uptick, having risen to the highest level since September 2024 at 50.7. However, civil engineering activity and commercial activity both fell to 44.2 and 45.1, with rates of subcontractors also rising to 57.6, the highest level since 2023.

Kelly Boorman, National Head of  Construction at RSM UK, said: “The headline PMI ticked up slightly for the fourth consecutive month, however the index is still below 50 and contracting amid ongoing housebuilding challenges, labour shortages and a slowdown in planning approvals. Although overall construction activity remains at a relatively low level, housing activity has seen an increase to the highest level since September 2024, which suggests confidence is returning to the market. This implies that recent government announcements to remove red tape and unlock new homes are finally mobilising projects despite market uncertainty around house prices and planning delays.

“However, the latest data reveals a noticeable tightening of subcontractors, coupled with an increase in rates, therefore meeting demand will remain a key challenge and counteracts what the government set out to achieve with its target of 1.5m new homes. But, changes to the skilled worker visa rules from July 2025 should help to alleviate this pressure. The rise in employers’ National Insurance Contributions and the National Minimum Wage earlier in the year may also have contributed to a slowdown in commercial and civil engineering activity and supply chain tension, given construction is a labour-intensive industry which has been slow to adopt technology to improve efficiencies.”

She added: “The introduction of the National Housing Bank will also help to unlock working capital to support build volumes and availability if demand softens. Additionally, devolved decision making could further support this, particularly if SMEs are granted access to smaller plot sizes for developments. With mortgage rates improving slightly, this could help to bolster industry confidence and encourage buyers to return to the market. The government’s new towns initiative to tackle the construction skills gap and Infrastructure Pipeline Portal will also bring more transparency and certainty to the industry. But what’s missing is clarity on the overarching housing strategy which needs to take a holistic approach towards mobilising housebuilding and accelerating planning reform.”

Thomas Pugh, Chief Economist at RSM UK and Ireland, added: “The rise in the construction PMI to 48.8 in June, its highest level this year, is yet another sign that the economy is recovering after the tax and tariff turmoil of ‘awful April’.

“Particularly encouraging was the jump in the housing activity to above 50 for the first time since September. What’s more, the input prices balance dropped to 60.9, its lowest level since January. That is in line with disinflation proceeding throughout the economy. Even though house prices have dropped off a little recently, we think this has much more to do with volatility around tax changes in April than any sign of a fundamental weakness. We think there are probably two more interest rate cuts to come in the second half of the year and with income growth still reasonably strong, that should support a continued recovery in the housing market over the next year.

“Admittedly, the absolute level of the PMI is still pointing to a stagnant construction industry in Q2, but the combination of a significant increase in government investment, a recovering housing market and lower interest rates should support a recovery in the industry in the medium-term.”