Rising costs, planning delays and fragile demand leave firms bracing for further turbulence

Britain’s construction sector may be stabilising tentatively but businesses still face significant headwinds in the coming months, according to a leading industry adviser.

The S&P Global UK Construction PMI (purchasing managers’ index) edged up to 44.5 in February 2026, following a partial recovery to 46.4 in January, though the index has remained below the growth threshold of 50 throughout the past year.

This, say analysts, points to an industry that is contracting rather than expanding.

Joe Sullivan, Construction and Real Estate partner at MHA, the financial consultancy with a base in Birmingham, said: “The slight uptick in Construction PMI suggests the sector is steadying but not bouncing back.

“Any small improvement is likely due to reduced weather disruption. Overall, demand still looks weak and many projects are being pushed back rather than kicked off.

“The market is still split. Infrastructure is holding up better, while housebuilding remains the weakest sector and is most sensitive to interest rate hikes. 

“Even if house prices are edging up, higher energy costs and changes in mortgage rates can quickly hit confidence and affordability.”

Costs and regulation squeeze margins

Cost pressures are also mounting. Input price inflation accelerated to a four-month high in January 2026, compounding wider margin pressures.

“The inevitable increase in cost of materials due to the war in the Middle East, the rise of minimum wage and labour pressures are squeezing margins, especially on fixed price contracts,” Sullivan added. 

“Extra regulation and longer waits between planning approval and starting on site are slowing activity and making firms more careful about investing.

“We expect a bumpy few months. On some projects, especially larger commercial ones, the numbers are tight, build costs are much higher and funding may become harder to secure. A sustained lift will depend on stronger new orders and steadier expectations for interest rates and input costs.”