Growth across the UK’s construction industry has slowed to the lowest rate for six months, as stagnant demand for housebuilding continues to drag on overall production, a new survey shows.

The latest S&P Global construction purchasing managers’ index (PMI) scored 53.3 in December, down from 55.2 in November.

Any reading above the 50.0 threshold indicates that activity in the industry is increasing while anything below means it is shrinking.

The latest score is the lowest since June, and came in below the 54.4 reading that analysts had been expecting.

Commercial work – like offices, shops and warehouses – continued to be the fastest-growing area of the construction sector in December, followed by civil engineering activity.

Nevertheless, business activity for both sectors grew at a slower rate than the previous month, the report said.

Although confidence recovered after a post-Budget slump during November, it was still much weaker than in the first half of 2024

Residential work remained the only subsector to register an overall decline in output in December, with housebuilding activity declining at the fastest rate since June.

Housebuilders have continued to grapple with weaker demand for new homes.

This has been driven by more fragile consumer confidence and borrowing costs remaining elevated, despite recent cuts to the UK interest rate.

The survey suggested there were more opportunities to bid for commercial construction projects last month, but that residential development projects faced cutbacks and there was a lack of new business to replace completed infrastructure work.

Tim Moore, economics director at S&P Global Market Intelligence, said: “Concerns about the demand outlook weighed on construction sector growth expectations for 2025.

“Although confidence recovered after a post-Budget slump during November, it was still much weaker than in the first half of 2024.

“Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.”

The sector should continue to outperform as Government spending supports building, and planning reforms help unblock the pipeline of projects

Elliott Jordan-Doak, senior UK economist for Pantheon Macroeconomics, said: “The construction PMI for December continues to show business sentiment in the sector well ahead of the pessimism evident in the services and manufacturing surveys released recently, but the latest drop takes the construction PMI below its long-run average.”

He added: “Admittedly the construction sector is sensitive to the weather, which could have disrupted production in December.

“The sector should continue to outperform as Government spending supports building, and planning reforms help unblock the pipeline of projects.”

The Labour Government has pledged to make reforms to the planning system and build 1.5 million more homes over the next five years.