The UK construction sector is coming under renewed pressure, as rising costs and weaker demand combine to create one of the toughest trading environments in years.
A closely watched survey of construction firms shows that input cost inflation rose sharply in April, reaching its highest level since June 2022. That was the period when commodity prices surged following Russia’s invasion of Ukraine, and April’s increase ranks among the steepest recorded since the survey began in 1997.
The latest rise has been driven by higher fuel, energy and raw material costs linked to the war in Iran, alongside disruption to global supply routes.
The sector’s wider performance has also weakened. The construction purchasing managers’ index (PMI), a key measure of activity, fell to 39.7 in April, down from 45.6 in March. Any reading below 50 indicates contraction, meaning the industry is not only facing higher costs but also a shrinking pipeline of work.
That combination is particularly challenging for a sector that accounts for around 7% of UK GDP and supports more than two million jobs.
Around two-thirds of firms surveyed reported higher cost burdens in April, with many citing suppliers passing on increased fuel costs. Disruption in the Strait of Hormuz and rising prices for imported materials have added further strain, particularly for businesses reliant on international supply chains.
Delays are also becoming more common. Vendor delivery times lengthened at the fastest rate since December 2022, with companies reporting shipping disruption and difficulties importing materials from the Gulf region.
At the same time, demand remains fragile. New orders are not replacing completed projects quickly enough, while sales decisions are taking longer as clients reassess costs and timing.
Employment is also starting to reflect the slowdown. Some firms are choosing not to replace staff who leave voluntarily, signalling a more cautious approach to workforce planning.
The result is a sector being squeezed from both sides: costs are rising rapidly, while demand and confidence are weakening. For construction firms, the immediate challenge is managing margins; for the wider economy, the concern is what a prolonged downturn could mean for investment, jobs and growth.
