Construction Market Overview: July 2025
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Mixed Signals for Construction as Cautious Optimism Meets Economic Uncertainty
The ONS have published their construction output data for May 2025, showing that UK construction output grew 1.2% over the three months to May 2025, supported by a 0.9% rise in new work and a 1.5% rise in repair and maintenance over the period. On a monthly basis, construction output declined by 0.6% in May, following three consecutive months of growth, including a 0.8% rise in April. This decline was driven by a 2.1% drop in repair and maintenance, while new work rose by 0.6%. Five of the nine key construction sectors experienced drops in output, with the largest fall seen in non-housing repair and maintenance by 2.4% and private housing repair and maintenance by 1.8%.
In June, UK construction activity contracted again marking the sixth consecutive month of decline, though the rate of slowdown eased slightly, with the S&P Global UK Construction PMI® rising to 48.8 from 47.9 seen in May but marking the slowest decline in construction output since the current period of contraction began in January. This downturn was largely driven by falls in commercial work, its sharpest drop since May 2020, and continued weakness in civil engineering, both of which outweighed a modest recovery in housebuilding which showed marginal growth for the first time since September 2024. However, overall new orders across construction declined at a faster pace, reflecting reduced client confidence and fewer tender opportunities and business sentiment dipped to its lowest level since December 2022, as firms cited concerns about the broader UK economic outlook and weak sales pipelines.
The latest Construction Industry Forecast for summer 2025 from the Construction Products Association predicts a cautious but steady rise in UK construction output, with growth of 1.9% in 2025 and 3.7% in 2026, consistent with projections from the Spring forecast, but the economic risks and uncertainties have risen considerably. Growth is expected to be led by private housing new build, private housing repair, maintenance & improvement (RM&I), and infrastructure, though each faces near-term risks including delayed project starts, fragile consumer confidence, and potential capital spending cuts. Private housing output is forecast to rise by 4.0% in 2025 and 7.0% in 2026, though challenges remain for smaller builders and high-rise developments due to regulatory delays. RM&I is supported by energy-efficiency schemes and fire safety work, but broader home improvement activity is held back by economic uncertainty, with recovery likely delayed until late 2025 or into 2026.
And, the June 2025 RIBA Future Trends survey shows that UK architects remain cautiously optimistic about future workloads, with a positive Workload Index of +8, though down slightly from the +11 seen in May. While 25% of practices expect an increase in work over the next three months, optimism has softened across most regions and sectors, particularly in private housing. Medium and large practices remain the most upbeat, with small practices showing modest expectations. However, current workloads are still 8% below last year’s levels, and concerns persist around economic uncertainty, rising costs, regulatory delays, and difficulty recruiting skilled staff. Overall, sentiment remains positive but tempered by caution.
Housing Market Rebounds, But Momentum Remains Fragile
The HMRC report that in May the number of property transactions in the UK totalled 81,470, 25.1% higher than the 64,680 seen in April, and 11.8% lower than a year earlier. However, these numbers have been affected by the changes in Stamp Duty Land Tax Rates in April 2025, where some households that were planning to move in 2025 Q2 brought forward transactions into March, if possible. This led to the inevitable spike in transactions seen in March, followed by a consequent decline in transactions in April and a level that remained subdued into May. Alongside this, the Bank of England report that in May, the number of mortgages approved for house purchase rose to 63,032 following four monthly falls, which is now 3.9% higher than April and 3.3% higher than a low base a year earlier.
The June 2025 RICS UK Residential Market Survey shows early signs of stabilisation in the housing market, with buyer demand turning slightly positive for the first time since December 2024 and near-term sales expectations improving modestly. The net balance for new buyer enquiries rose to +3%, suggesting a slight recovery, though overall sales activity remains subdued. More generally, the overall outlook remains cautious, with house prices broadly flat or marginally negative and regional disparities persisting.
Nationwide report that in June 2025 UK house prices fell 0.8% month-on month, the largest monthly decline since early 2023, with annual growth also slowing to 2.1% from the 3.5% seen in May. Despite recent gains, date shows that the housing market is losing momentum amid weaker demand following the stamp duty increase in April. In contrast, Halifax report that in June 2025, UK house prices remained broadly flat, with no monthly change compared to the fall of 0.3% seen in May and annual growth easing to 2.5%. Overall, the housing market shows signs of stability with a rebound in mortgage activity and first-time buyer numbers following the stamp duty changes in April, boosted by wage growth and stable interest rates, which are bolstering affordability and confidence.
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