At a glance
UK construction activity fell for a 12th straight month in December, cementing the sector’s longest downturn since the global financial crisis.
Civil engineering and residential building are now the weakest-performing segments, with PMI readings deep in contraction territory.
A new report is pushing for “natural capital” to be designated as critical national infrastructure, redefining what sits inside the UK’s infrastructure strategy.
Construction insurance capacity is improving but with much tougher scrutiny on fire safety, cladding and decarbonisation compliance.
No new UK government construction or infrastructure policy announcements were issued on 11–12 January, keeping attention on previously signalled reforms.
Today’s update: latest PMI data confirms a historic construction downturn even as parts of the industry look to a 2026 recovery on the back of infrastructure and utilities work. At the same time, policy and risk frameworks are tilting towards natural capital, safety and net zero, reshaping how projects are planned, insured and delivered. Here’s what you need to know to stay ahead today.
Ongoing Stories
Following earlier coverage of pressures on the £530bn project pipeline and infrastructure delivery risks, the December PMI at 40.1 confirms that those strategic concerns are now embedded in a record-length downturn, with civil engineering and housing activity particularly squeezed.
Returning to the theme of green policy and infrastructure planning reform, ISEP’s call to treat natural capital as critical national infrastructure adds a new lens for future planning and investment decisions alongside the Planning and Infrastructure Bill and clean energy measures highlighted this week.
Building on recent updates around growing regulatory complexity, FOIL’s latest briefing shows how insurers are tightening oversight of building safety and net-zero compliance even as capacity improves, raising the bar for risk management on live and future schemes.
Top 5 headlines
💰 UK construction records longest downturn since financial crisis
The S&P Global UK Construction PMI came in at 40.1 for December 2025, the 12th consecutive month below the 50 no-change threshold and the longest continuous contraction since 2007–09. Civil engineering was the weakest-performing segment with a PMI of 32.9, residential building dropped to 33.5 – its lowest since the May 2020 lockdowns – and commercial work fell to 42.0, its sharpest contraction in over five years. This entrenched downturn confirms that market stress now matches strategic warnings about a fragile pipeline and will continue to weigh on order books, pricing and capacity into early 2026. (Source: geomechanics.io, KWSN)
💰 Civil engineering and housing take the brunt of the slowdown
Within the December PMI data, civil engineering activity slumped to 32.9, while residential building fell to 33.5, signalling severe contraction in both infrastructure and housing delivery. Commercial construction also deteriorated to 42.0, the fastest rate of decline in more than five years. For contractors and consultants, this mix points to intense competition for viable work, greater bid selectivity and heightened pressure on margins across core sub-sectors. (Source: geomechanics.io)
💰 Cautious optimism for 2026 as firms eye lower rates and utilities work
Despite the downturn, 37% of surveyed construction firms expect output to rise in 2026, with sentiment supported by anticipated lower borrowing costs, infrastructure spending – particularly in utilities and water – and easing inflation. This suggests that while 2025 closes in deep contraction, boardrooms are positioning for a gradual rebound centred on regulated infrastructure and long-term programmes. For investors and delivery teams, pipeline planning now will determine who is ready to move when financing conditions improve. (Source: geomechanics.io)
🏛️ Natural capital push aims to redraw UK infrastructure strategy
A new report from the Institute of Sustainability and Environmental Professionals, supported by Jacobs, urges the UK government to designate “natural capital” – green and blue natural assets – as critical national infrastructure. It proposes a Strategic Nature Network to be treated as a Government Major and Nationally Significant Infrastructure Project, embedding nature-based solutions into planning and investment decisions to bolster economic growth and resilience. If taken up, this would widen the definition of infrastructure, reshape funding priorities and create a new class of environment-linked projects for the sector. (Source: ISEP)
⚙️ Insurance capacity up, but scrutiny tightens on safety and net zero
FOIL’s latest construction insurance briefing reports increasing capacity for project cover but notes intensifying focus on fire safety, cladding, wider building safety compliance and adherence to net-zero and government decarbonisation policies. This evolving regulatory and risk environment is changing underwriting expectations and the information demanded from project sponsors. Developers and contractors face a more exacting pre-contract risk assessment, with programme, design and compliance decisions now directly influencing insurability and cost of cover. (Source: FOIL)
Also in the news
🏛️ No new major UK government construction or infrastructure policy announcements were issued on 11–12 January 2026, leaving the sector focused on previously trailed planning, building safety and industrial strategy reforms due later in the year. (Source: GOV.UK)
🌱 The ISEP natural capital proposals reinforce a wider policy shift towards integrating environmental resilience into infrastructure planning, complementing ongoing clean energy and grid-related initiatives. (Source: ISEP)
💰 Analysts note that the current PMI trend will likely sharpen lender and investor scrutiny of scheme fundamentals, particularly in speculative commercial and residential projects. (Source: KWSN)
⚙️ The FOIL update underlines that cladding and fire safety histories remain central to insurance decisions on both new-build and major refurbishment projects. (Source: FOIL)
🌱 Policy watchers expect the emerging natural capital agenda to influence future iterations of the National Infrastructure Strategy and related funding frameworks. (Source: ISEP)
The Daily Build is written for people shaping the UK’s construction and infrastructure pipeline. If this briefing is useful, consider forwarding it to colleagues who are planning bids, managing risk or setting strategy this quarter.
To stay aligned as conditions shift, keep this update handy for your 9 a.m. discussions.