Britain’s construction industry shrank at the fastest pace in more than five years in October, with civil engineering suffering its steepest drop since the pandemic as weak demand and uncertainty ahead of Chancellor Rachel Reeves’ upcoming Budget weighed on activity.

The S&P Global UK Construction PMI fell to 44.1 from 46.2 in September—well below the 50 no-change mark and missing the 46.7 consensus—extending the sector’s longest downturn since the global financial crisis. The survey highlighted broad-based weakness:

• Civil engineering activity slid to its weakest level since May 2020, when COVID lockdowns halted projects.
• Residential building declined at the sharpest pace since February (subindex 43.6), reflecting subdued new orders, tighter financing, and stretched affordability.
• Commercial construction contracted marginally, with firms citing delayed client decisions and cost scrutiny.

Respondents pointed to hesitant clients and project deferrals tied to fiscal uncertainty in the run-up to the Budget, alongside still-restrictive financing costs. While input cost pressures have eased from 2022 peaks, firms reported continued caution on hiring and capacity, with some signaling increased tendering competition and thinner margins.

Macro implications: A deeper construction slump adds to evidence of uneven UK momentum into Q4. For the Bank of England, the print reinforces a picture of cooling domestic demand even as services inflation lingers—supporting a wait-and-see stance rather than near-term easing. In markets, the combination of softer growth signals and fiscal uncertainty could keep gilt volatility elevated and sterling sensitive to Budget details on housing, infrastructure, and planning reform.

What to watch: Any Budget measures to accelerate infrastructure delivery, unlock housing supply, or improve planning timelines could stabilize order books into 2025; absent that, survey respondents suggest activity risks remain skewed to the downside.