The data and analytics company found that “hopes of a rebound in domestic economic conditions and signs of an improved near-term outlook for customer demand” had lifted builders’ confidence.

However, output across the sector fell again in July, but at the slowest rate in four months, with housebuilding, commercial construction and civil engineering all recording a smaller drop in activity than in June.

“July data suggests that the performance of UK construction sector has started to stabilise after a sharp downturn throughout the second quarter of 2026,” said Tim Moore, the economics director of S&P Global Market Intelligence.

“Business activity levels continued to decline in all three main categories, but in each case the rate of contraction was much slower than in June. This was supported by the weakest reduction in new business intakes since September 2025.”

Civil engineering rose to 38.3 from 22.1 in June, its lowest figure since the pandemic. New orders also ticked up to 47.6 from 41.5 in June, and future activity rose from 59.7 to 60.1.

Housebuilding rose to 41.8, up from 35.9 in June and following nine consecutive months below the 40 mark.

Kelly Boorman, national head of construction at audit, tax and consulting firm RSM UK, said: “While it’s encouraging to see the PMI on the rise again this month, and sentiment is improving, uncertainty remains among construction firms and housebuilders around how existing infrastructure will support new plans for devolved spending. Tension in the Middle East also continues to hamper the sector, as pipelines continue to shrink and oil prices rise again.

“The Treasury’s announcement yesterday of £9 billion borrowing will stimulate construction activity, but this is a fraction of what is required to adequately support infrastructure and major project delivery over coming years. Further injection in funding and more certainty in where spend will be committed will aid sentiment, but with a realisation on the ground that mobilisation is likely to take 2-3 years under the current procurement and planning regime. As a result, further construction firm and sub-contractor administrations are likely on the horizon. Many UK infrastructure projects have also been shelved, which has impacted pipelines.

“Housebuilders need clarity around how funding for housing will be deployed, and how current barriers around planning, design and procurement can be overcome. Funding is of course welcome, but this alone won’t necessarily resolve some of the challenges the construction sector currently faces.”

Thomas Pugh, chief economist at RSM UK, added: “The construction sector seems to have remained in the doldrums this summer, despite the good weather. Output has barely risen since 2017, and has slumped further over the last nine months. The increase in the PMI in July suggests the situation improved a little last month, but at 44.7, it’s pointing to subdued activity in the sector.

“Not only is this a mechanical drag on GDP growth, as the construction sector accounts for about 6% of the economy, but the lack of new housing and other building activity is a drag on broader productivity growth.

“The good news is that the recent fall back in oil prices should help ease input cost pressures, which are pushing up the cost of building and will make it less likely that interest rates will rise, which should support demand. What’s more, the promised surge in investment from the Burnham government could provide another boost to demand, if adequate funding and support is put in place.”

Joe Sullivan, partner at MHA, said: “July’s construction PMI suggests the pace of contraction is easing but activity still remains well below the 50 threshold. The sector continues to be hampered by procurement delays, project timing issues and uncertainty over funding.

“The short-term picture remains difficult, particularly in infrastructure, where too many projects are still stuck between announcement, tender and contract award. But the longer-term pipeline is more encouraging. Demand linked to energy and utilities, grid capacity, data centres and defence remains strong, and infrastructure will need to do much of the heavy lifting if construction is to return to growth.

“Greater political and funding certainty could help unlock schemes that have been held back. Planning reform may help over time, but the sector needs more than incremental change. The challenge is not a lack of policy direction, but the pace at which investment turns into contracts, mobilisation and activity on site.

“Housing remains under pressure, hit by affordability constraints, planning delays and fragile buyer confidence. Commercial activity is arguably the least weak part of the market, supported by industrial and logistics related investments, with hopes that conditions will start to stabilise in the coming months.

“The Budget will be a key moment. Until there is greater clarity on funding, clients and contractors are likely to remain cautious about committing to major schemes.

“Cost pressure is also sharpening the focus on value for money. Rescoping or redesigning schemes can delay procurement further, while fixed-price contracts remain a hard sell for contractors unwilling to absorb higher risk and thinner margins.

“Overall, the near-term outlook for the sector remains weak but survey respondents are feeling more confident than they have in previous months. If funding clarity improves and procurement delays ease, infrastructure could still provide the momentum needed for a broader recovery.”

Brian Smith, head of cost management at AECOM, added: “A summer marked by settled weather would usually be an opportunity for contractors to drive growth in output. But, despite decline slowing further, firms’ prospects aren’t going to change materially until we see movement in the economic outlook.

“Many projects are still in a holding pattern and awaiting a green light from clients who remain cautious of stubbornly high inflation and interest rates. One thing that will boost confidence is speedy decision-making from the government. The Social and Affordable Housing Programme is one example that will spur builders into action, but we can’t afford even a moment’s delay.

“Progress on nationally significant infrastructure schemes will also help to strengthen order books in the long-term and give contractors the foundation they need to invest in jobs and capacity. Heathrow is the best example of where large-scale infrastructure, with no half-measures, will supercharge the economy.”