British construction activity declined again in August following brief gains the previous month, according to the latest S&P purchasing managers' index (PMI) data.

The benchmark index remains below the 50 mark that separates expansion from contraction, pointing to continued softness across commercial and residential development.

While the pace of the downturn has moderated compared to the start of the year, industry specialists warn that elevated costs, sluggish approvals, and broader economic uncertainty continue to stall progress.

Atul Kariya, head of real estate and construction at accounting and advisory firm MHA, noted that structural challenges persist across the sector despite recent government initiatives.

Mr Kariya said: “Construction activity dropped again in August after signs of life in July and the overall picture remains weak. The PMI is still well below the 50 threshold and firmly in contraction territory, even if the pace of slowdown now looks less severe than earlier in the year. For now, the sector is doing little more than treading water.

“The fundamentals have not changed. Demand is weak, costs remain high, planning is still too slow, and confidence is being held back by uncertainty. A new government may bring fresh conversations on housebuilding and reform, but for house buyers and construction businesses it also means another period of wait-and-see, particularly ahead of the Budget.”

Residential building continues to lag other construction disciplines, hit by high borrowing costs and constrained consumer affordability across regional UK markets.

Mr Kariya said: “Housing remains the clearest drag. Buyers are still being squeezed by affordability pressures and creeping tax burdens, while developers continue to face unnecessary planning restrictions that make it harder to get viable schemes moving. Recent proposals to fast-track homes near well-connected stations and give more weight to development in sustainable locations are a step in the right direction, but the test is delivery. The sector has heard plenty of promises before, but what it needs now is a planning system that turns consent into spades in the ground.

“There are pockets of opportunity, particularly around data centres and regeneration, but even these projects are running into familiar blockers including grid constraints, viability concerns and slow approvals. The issue is not a lack of ambition or demand for new space. It is the continued difficulty of turning investment intent into actual building.

“Until planning reform starts to unlock sites faster, and the Budget gives businesses reasons to invest rather than pause, construction is likely to remain subdued.”