Construction activity shrank 'at fastest pace since COVID' ahead of budget

The UK's construction sector suffered its sharpest contraction in activity since May 2020, according to a closely-watched survey taken before this month's budget.

S&P Global's monthly purchasing managers' index (PMI) covering November makes grim reading for the government.

The survey of business behaviour showed steep falls in all three sub-sectors: civil engineering, residential, and commercial building.

Money latest: Is property still a good investment?

Of particular interest to ministers will be signs of progress on its key housebuilding target of 1.5 million new homes across England by the end of the parliament.

But residential construction activity was found to be at its weakest since the first lockdown during the COVID pandemic.

The report also noted "steep reductions in new orders and employment".

Other recent business surveys have also shown similar concerns about investment, hiring and demand in the lead-up to Rachel Reeves's budget on 26 November.

S&P Global's measure of activity across services, manufacturing and construction suggested all but zero growth.

The report will add fuel to claims that the government's messaging around the public finances since taking office has damaged the economy.

While she has blamed factors such as Brexit and the US trade war for the country's slowdown during the second half of the year, inflation and the jobless rate crept up heading into autumn and business groups and economists have laid blame at the door to Number 11.

It is argued that employers have passed on, since April, rising costs from her first budget, which taxed employment, hurting the jobs market and raising the pace of price growth in the process.

The UK's unemployment rate stood at 4.1% when Labour took office. It is currently at 5%.

Former Bank of England chief economist Andy Haldane told Sky News ahead of this month's budget that "repeated mistakes" had been "sucking all life" from business and consumer confidence.

While the government's critics have piled in over claims the country was misled over the size of the task facing Ms Reeves ahead of last week's big speech to MPs, an increasing number of industry figures are voicing their disapproval too.

Frasers Group, the retailer formerly known as Sports Direct, said on Thursday that the lead-up to the budget had been "incredibly annoying" as shoppers' willingness to spend was "very subdued".

Just hours later, the motor industry's new car sale figures for November blamed the budget build-up for brakes being applied to demand.

Read more:
The chess row facing Reeves
Did Reeves exaggerate budget bad news?

The Society for Motor Manufacturers and Traders said the speculation around tax rises to come had proved a "drag", with sales slipping by almost 2%.

The respected EY ITEM Club said a budget link to the plunge in construction output should be treated with a healthy degree of scepticism.

Its chief economic advisor, Matt Swannell, said: "Throughout most of the year, the PMI has been much more pessimistic than official estimates of construction sector activity, and in November, this negativity looks to have been magnified by expectations of tax rises at the autumn budget.

"Even before November’s significant fall, a flagging construction PMI has consistently remained in contractionary territory across 2025. But between January and September, the Office for National Statistics (ONS) estimated that construction sector output grew in six of the nine months, leaving activity more than 1% higher than at the end of last year. With the tax rises announced at the budget towards the lower end of expectations, a significant rebound in the PMI next month seems likely."

(c) Sky News 2025: Construction activity shrank 'at fastest pace since COVID' ahead of budget