4th December 2025
- November’s construction Purchasing Managers’ Index (PMI) points to a notable contraction for the sector. However, the survey’s pessimism appears overstated and largely reflects business uncertainty around the Autumn Budget, which hadn’t been announced at the time of the survey. With the eventual Budget tax rises at the lower end of expectations, a rebound in the PMI seems likely next month.
- Nonetheless, the construction sector’s outlook is mixed. Government investment and planning reforms will offer some support, but continued uncertainty around the domestic and international economy could see some large projects either cancelled or delayed.
Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “November’s construction PMI fell sharply to 39.4, down from 44.1 in October. November’s reading was the weakest since the onset of the pandemic and activity was reported to have contracted in all major sub-sectors. Construction businesses pointed to fragile market confidence hampering demand with the Autumn Budget, which was announced after the survey was conducted, providing a significant source of uncertainty for the sector.
“November’s extremely weak PMI should be approached with a healthy degree of scepticism. Throughout most of the year, the PMI has been much more pessimistic than official estimates of construction sector activity, and in November, this negativity looks to have been magnified by expectations of tax rises at the Autumn Budget. Even before November’s significant fall, a flagging construction PMI has consistently remained in contractionary territory across 2025. But between January and September, the Office for National Statistics (ONS) estimated that construction sector output grew in six of the nine months, leaving activity more than 1% higher than at the end of last year. With the tax rises announced at the Budget towards the lower end of expectations, a significant rebound in the PMI next month seems likely, even if it remains below the 50 no change mark.
“However, with that said, the Autumn Budget didn’t seem to move the needle significantly for the construction sector and its outlook remains mixed. Public infrastructure projects and planning reforms will provide the sector with some support, but continued uncertainty around the UK’s economic outlook will see some private sector construction projects postponed or cancelled, while the availability of skilled labour and April’s confirmed 4.1% rise in the National Living Wage will likely continue to affect the viability of some construction developments.”