Construction PMI: Budget boost won’t fix housebuilding slump overnight

The headline construction PMI decreased in October to 43.6, down from 46.1 in September, the sharpest fall in total activity since June. This was driven by a downtick in residential activity, which fell to 35.1, the lowest level in 2026. Commercial and civil engineering activity contracted at slower rates, at 46.3 and 45.9 respectively.

Carly Thorpe, Construction & Engineering Partner at Walker Morris, said: “The latest figures reflect a two-speed construction market, with steadier commercial and civil engineering activity masking the continued slump in housebuilding, which fell to the lowest level so far this year. The Budget has brought welcome measures to support the housing market, including a further £1bn for social and affordable housing and the Your First Home scheme. However, weak demand, rising costs and regulatory uncertainty are constraining delivery, making the Government’s housebuilding ambitions difficult to achieve.

“Your First Home should help stimulate demand, but demand is only one side of the equation. New home registrations fell 13% year on year in Q3 2026, while developers still need schemes to stack up commercially amid construction costs, planning permission and wider viability pressures. Investors also need greater confidence that planning and regulatory rules will remain stable, so schemes backed today will still be viable in a few years’ time. Without addressing those barriers, buyer support alone is unlikely to drive the volume of new homes needed to get delivery back on track, particularly with the OBR expecting housing delivery to fall over the next three years. The scheme also does little to support other parts of the housing market, including those looking to move up the property ladder into family homes or downsize into later living.”

She added: “More positively, infrastructure and energy continue to offer a stronger pipeline, but the question is how quickly those projects can move into delivery. Grid capacity, long lead times for materials, shortages of skilled labour, planning bottlenecks and increased regulation could all hold projects back, so the test will be whether greater investment and Government support translate into a boost in activity on the ground.”