UK construction PMI, September 2026: activity falls at the slowest rate in eight months

This article is for contractors, subcontractors and suppliers to the building trade who want to know where construction activity is heading and what it means for their cash flow. The latest construction purchasing managers' index (PMI), compiled by S&P Global, shows the industry is still shrinking, but more slowly. Below we set out the figures and the funding options for construction firms. Smart Funding Solutions is a broker, not a lender: we compare whole-of-market options across 300+ lenders, arranging funding from £10,000 to £20 million.

01The headline figures for September 2026

As ITV News reported on 6 October 2026, the UK construction PMI rose to 46.1 in September from 44.3 in August. A reading below 50 means activity is falling, so the industry is still contracting, as it has been since January 2025. But the decline was the slowest for eight months.

The PMI is based on a monthly survey of construction purchasing managers, asking whether activity, new orders, employment and costs are higher or lower than a month earlier. It is one of the earliest indicators of how the industry is doing.

02Housebuilding, commercial and civil engineering

The three parts of the industry are moving at different speeds:

• Housebuilding was again the weakest. Industry title PBC Today reported a residential reading of 40.7. Tim Moore, economics director at S&P Global Market Intelligence, said rising borrowing costs and unfavourable market conditions weighed on output.
• Commercial building saw its smallest fall in activity since May 2025, with PBC Today reporting a reading of 48.5.
• Civil engineering also contracted, though law firm Walker Morris pointed to stronger civil engineering activity in its comments on the figures.

03Orders, jobs and costs

Below the headline, the picture is mixed:

• New orders were subdued, as clients deferred decisions on major projects. PBC Today reported that total new work fell at its fastest rate in three months.
• Employment fell again. Construction jobs have declined every month since January 2025, and September saw the fastest fall in five months.
• Input costs are still rising, with around a quarter of firms reporting higher purchasing costs, citing fuel surcharges, freight and raw materials. Overall input price inflation softened for the fourth month in a row, though Tim Moore said that trend seems unlikely to endure.

Rising costs and fewer new orders squeeze margins from both sides, which is why cash flow planning matters so much in construction right now.

04Construction insolvencies and payment terms

The PMI fits with other data. The Insolvency Service recorded 3,866 construction company insolvencies in England and Wales in the 12 months to August 2026, 17% of all cases with an industry recorded and more than any other sector, although that was 2% fewer than in the previous 12 months.

Payment terms are part of the problem. Long terms, applications for payment that are valued down and retentions held for months all tie up cash. The government's Commercial Payments Bill would ban retentions under construction contracts and cap payment terms at 60 days when large businesses pay smaller suppliers, but it is still going through Parliament and is not yet law.

Borrowing costs matter too. S&P Global linked the weakness in housebuilding to rising borrowing costs, and the Bank of England held Bank Rate at 3.75% in September with three of its nine policymakers voting for a rise. See our article on what the Bank Rate decision means for business borrowing.

Rising costs and fewer new orders squeeze margins from both sides, which is why cash flow planning matters so much in construction right now.

05Funding options for construction firms

Construction businesses have specialist options that general business loans do not always cover:

• Construction invoice finance releases cash against applications for payment and certified invoices.
• Contract funding helps cover the upfront costs of a new contract before the first payment arrives.
• Plant and machinery finance spreads the cost of equipment, so cash is not tied up in kit. Our construction equipment finance guide compares hire purchase and leasing.
• Working capital loans cover wages and materials while you wait to be paid.

Our construction finance page brings these together, and there are dedicated pages for scaffolding firms, electrical contractors and builders' merchants.

06How to compare your options

1. Map out your cash flow for the next few months, including when each application for payment and retention is due.
2. Decide whether you need to fund invoices, equipment or a gap in working capital. Each has its own lenders, so the answer shapes who you approach.
3. Have your latest accounts, recent bank statements and a list of current contracts ready, as lenders will want to see your pipeline of work.
4. Use Instant Quotes to see your lender matches instantly, with no credit check.
5. Compare offers on total cost and on how well they fit the way your contracts pay.

Activity is still falling, but more slowly, and firms with the cash to take on work when orders return will be best placed. Get your Instant Quotes to see which lenders could back your construction business. Lenders make every decision, and all finance is subject to status.