Introduction
In July 2025, the S&P Global UK Construction PMI plunged to 44.3 from 48.8 in June its steepest drop in over five years signalling broad contraction.
The Office for National Statistics (ONS) reports that total output grew only modestly in Q2 2025 +1.2% vs Q1 and new orders fell sharply -8.3% in April–June vs Jan–Mar.
Builders today face weakening demand; incoming projects declined for the seventh straight month in July. For UK builders, especially smaller firms, this “September slowdown” means less work, tighter cash flows and pressure on margins.
Figure: S&P Global UK Construction PMI (total activity index) from 2015–2025. A reading below 50 indicates contraction. July 2025 = 44.3.
Why the Slowdown? Key Causes
- Economic uncertainty and inflation
Consumer and business confidence are fragile, so clients, especially private developers, are holding back on new projects.
Meanwhile, 63% of UK construction firms cite tighter finances as their top obstacle, as per RICS.
Higher interest rates also push up borrowing costs for builders and homebuyers alike.
- Rising costs and supply issues
Material costs and wages are still climbing: 75% of builders report material price rises recently and 67% see higher labour costs, according to FMB (Federation of Master Builders).
Even though core inflation is cooling, firms face higher bills for steel, timber and energy.
Tight supply chains have lengthened delivery times and credit conditions have weakened sharply over recent quarters.
- Planning and policy headwinds
A chronic shortage of planning approvals and regulatory delays is another drag.
In a recent RICS survey, 63% of respondents named planning and regulation issues as a significant barrier to activity.
UK builders, especially SMEs report that planning holds up projects, even as the government promises reforms.
- Skills and labour shortages
Paradoxically, construction firms still face labour gaps even as activity slows.
Over 60% of small builders say they’re directly affected by a shortage of skilled trades, leading to delays on 49% of jobs and cancellations in 23%, says the FMB press release.
Recruitment freezes and layoffs were reported for the 7th month running in July.
In short, limited staff and new work both pinch margins, making it hard to ramp up even when opportunities arise.
Impact on UK Builders
- Fewer new contracts
The July PMI showed incoming work falling at the fastest pace since early 2020. Commercial projects and some residential schemes are being postponed or cancelled.
Builders may see pipelines shrink, forcing them to compete harder for the remaining jobs.
- Tight cashflow and costs pressure
Builders report margins under pressure and are cutting operating expenses. Many firms are delaying machinery purchases or scaling back on subcontracts.
Payrolls are down, with firms reporting layoffs and recruitment freezes as they trimmed staff to cut costs.
- Shift to maintenance work
With new builds slow, repair and maintenance (R&M) is relatively steadier. In 2024, 44% of UK construction output came from R&M work.
Builders able to pivot into retrofit, renovation or public maintenance projects may partly offset lost volume in new housing and commercial work.
- Regional and sectoral differences
RICS data show infrastructure projects in energy and transport expanding with a +13% net balance and expected to lead growth.
There are also modest signs of recovery: by Q3 a Citi/FedBank survey notes easing inflation on materials, which stabilised costs and helped project delivery.
However, smaller housebuilders and home-improvement contractors remain exposed to consumer caution.
What should builders do now?
In practice, official forecasts still see construction output rising in 2025 by about +1.6% overall.
This means demand will return eventually, so builders need to survive the downturn, not panic.
6 Ways Builders Can Respond: Action Steps
- Prioritise Cashflow and Efficiency.
Audit your costs and contracts now. Negotiate better terms with suppliers and contractors and be disciplined on budgeting. Cash reserves and credit lines are lifelines in a slowdown. Diversify clients to spread risk.
For example, focus more on stable sectors like public infrastructure or maintenance contracts if private orders fall off.
Repair-and-maintenance work often holds up better and made up 44% of 2024 output. RICS notes financial constraints as the top concern, so prudent cash management is crucial.
2. Invest in Talent and Retention.
Despite a downturn, skilled labour is scarce. Hold onto key staff by managing workloads and offering training.
Upskill workers in emerging areas like sustainable building methods and new tech to improve productivity.
With hiring expectations still positive at +15% net, there’s a war for talent – use it as an opportunity to attract quality labour from competitors.
Work with apprenticeship schemes and consider short-term contracts to stay flexible.
3. Lean on Technology and Data.
Now is the time to improve planning and productivity. Modern construction ERP like Xpedeon can streamline operations and showcase hidden savings. ERP tools provide real-time views of budgets, schedules and materials across all projects.
By tracking costs and progress in one system, builders avoid overruns and can bid more accurately.
For instance, a good ERP links financials and project modules so that CFOs see exactly where spending is highest.
In a downturn, tighter control of every pound is vital. Construction ERP systems are designed for exactly this, helping firms track expenses, improve collaboration and keep projects on budget.
4. Focus on Customer Confidence and Quality.
Offer transparent pricing and highlight past successes. Emphasise quality and safety compliance, a big concern due to recent regulations.
In an uncertain market, word-of-mouth and reputation matter more than ever, a few well-executed projects can carry you through slow times.
5. Plan Bidding Strategically.
Smaller firms may focus on niche markets like heritage renovation or energy retrofits where competition is lower.
Use the slowdown to refine your business strategy: what projects give the best margin? Which sectors are propped up by government spending like infrastructure and social housing?
6. Leverage Government and Industry Support.
Stay on top of grants, skills funding and policy changes.
Industry bodies like CITB, FMB and CIOB often provide advice and training subsidies during downturns.
The UK government has earmarked billions for construction skills and housing initiatives – builders should tap into these schemes.
Also keep an eye on policy reforms like planning fast-track measures that could spur opportunities.
Engaging in industry surveys and forums such as those by RICS and FMB gives advance notice of changes and a voice in shaping them.
By taking these steps, UK builders can weather the slowdown and even emerge stronger. Firms that cut costs, optimise bids and adopt construction tech will better withstand the lean period.
Construction ERP and Digital Tools: Why They Matter
Investing in the right software is especially useful now. A construction ERP system unifies finances, project management and operations, essentially acting as a digital nervous system for a building business.
For UK builders facing the September 2025 slowdown, Xpedeon ERP offers proven results.
JN Bentley, a key player in UK construction, used Xpedeon ERP to double their revenue in just two years while maintaining lean operations.
Lovell Homes achieved 2.5x faster payment processing and 10x better visibility across their £200 million annual spend.
These results demonstrate that the right technology investment can help builders not just survive downturns but emerge stronger.
For example, if tenders dry up, an ERP can highlight which past projects were most profitable so you can prioritise similar future work. It also automates procurement and inventory management, reducing stock costs. ERP features like project costing, analytics and subcontractor management help keep multi-project firms on track.
In short: builders using advanced software see projects run smoother and margins tighten less.
Conclusion
In sum, the September 2025 construction slowdown is real – driven by weak demand, cost pressures and uncertainty.
For UK builders, the key is to use this slowdown wisely by investing in systems like ERP, digital tools, skills that make the business more robust.
With official forecasts still predicting moderate output growth of about +1–2% annually, the builders who survive this dip will be ready for the next upturn.
This is where having practical, tailored technology becomes a key advantage.
At Xpedeon, we understand construction is complex and dynamic. That’s why our construction ERP platform is built specifically for how builders work, from site teams through to finance and procurement.
If navigating the current slowdown is a priority, exploring how an ERP system can support that journey is a practical next step.
Book a demo with us to experience firsthand how these connected tools can help your business stabilise now and grow when the market rebounds.
FAQs: What Builders Need to Know
1.What is causing the UK construction slowdown?
Multiple factors coincide. The interest rates have weakened client demand, while material costs remain high.
Planning and regulatory delays are compounding the issue. Industry surveys highlight that most firms point to tight finances and planning red tape as top barriers.
In short, uncertainty about costs and approvals is causing businesses to delay or cancel projects, slowing overall industry activity in UK.
2. How does the slowdown affect builders?
A slowdown means fewer contracts, tighter budgets and pressure on cash flow.
Employment often softens – in July 2025 payrolls fell for the seventh month.
Margins shrink as competition increases and clients haggle over prices. On the flip side, firms also get a chance to fix inefficiencies, negotiate better terms and retrain staff.
The slowdown underscores the need for strategic planning, focusing on profitable work and maintaining customer trust.
3. How can UK builders prepare for or survive a downturn?
Practical steps include strengthening finances, diversifying work and improving efficiency.
Many builders thrive on word-of-mouth, so service quality and reliability become extra important when business is scarce.
Investing in staff training and machinery upkeep during slow periods can also boost productivity later.
Industry bodies recommend staying engaged: use survey insights to adapt strategy, for example focusing on regions or sectors still growing.
4. What is the UK Construction PMI?
The Construction PMI (Purchasing Managers’ Index) is a monthly indicator of UK building activity, compiled by S&P Global from surveys of about 150 firms.
It combines sub-indicators – output, orders, hiring, etc. into one index: above 50 = expansion, below 50 = contraction.
In July 2025 the PMI fell to 44.3, signalling a sharp contraction. Each month the PMI is released – typically on the first Friday – and is often cited by the media as a real-time gauge of the industry’s health.
5. How to find UK construction reports and data?
Government and industry bodies publish regular statistics.
The ONS releases monthly bulletins titled “Construction output in Great Britain” with data on total output, new orders and sector breakdowns. These official stats are freely available on the ONS website.
Industry surveys like the RICS Construction Monitor and FMB/CIOB State of Trade provide forward-looking sentiment.
Many trade journals such as Construction News and Builders’ Merchants News cover the latest PMI and ONS releases.
You can also consult the CITB’s Construction Workforce Outlook for longer-term forecasts. Searching terms like “ONS construction output UK” or visiting sites of RICS, CITB, FMB and the CLC will yield authoritative reports.