UK construction output falls at fastest pace in six years in May

UK construction output fell at the fastest pace in six years in May, according to a survey that showed broad-based weakness across the sector. The headline index dropped to its lowest level since May 2020, and excluding the pandemic period, it marked the steepest decline since March 2009.

The downturn was led by residential activity, which posted the weakest reading at 36.0, followed by civil engineering at 36.2 and commercial construction at 39.0. Firms cited project delays, deferred investment decisions, and general cutbacks as key factors behind the slump. The data underscore the deepening contraction in the UK construction sector during the second quarter, as elevated borrowing costs and subdued demand continue to weigh on activity.

For interest rate traders, the construction PMI adds to evidence that the UK economy is losing momentum, which could influence the Bank of England's policy path. A sustained downturn in construction may reduce inflationary pressures in the sector, but the broader implications for GDP growth remain a concern. Markets will watch upcoming services and manufacturing PMIs, as well as inflation and employment data, for further clues on the BoE's next move. NowPrice users can track real-time UK gilt yields and swap rates to gauge shifting rate expectations.