According to UK construction companies there has been a sustained downturn in business activity, alongside pressure on margins from sharply rising output costs.

Combined with a decline in new orders, this contributed to the fastest reduction in employment numbers in almost four-and-a-half years.

The PMI tracking changes in total industry activity posted 46.4 in March, up from a 57-month low of 44.6 in February but still well below the neutral 50.0 threshold.

Despite this, lower volumes of construction output had now been recorded for three consecutive months and the latest reading indicated a solid pace of contraction.

The repost also indicated the lowest business optimism since October 2023, with lower workloads, elevated interest rates and worries about the broader economic outlook continuing to weigh on business activity expectations in March.

Residential construction activity saw a slower pace of decline than in February, however the respective seasonally adjusted index was still well inside negative territory (44.7). respondents noted weak demand conditions, however, some suggested that easing borrowing costs had helped support confidence.

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In terms of commercial building, there was only a moderate decline I  March (47.4), despite seeing the fastest rate of contraction since January 2021 — lower business activity was linked to ‘lacklustre’ UK economic prospects and client investment spending being impacted by rising geopolitical uncertainty.

Tim Moore, economics director at S&P Global Market Intelligence, said: "March data highlighted a challenging month for UK construction companies as sharply reduced order volumes continued to weigh on overall workloads.

"Commercial work also saw a headwind from delayed decision-making on major projects, largely due to worries about the impact of rising global economic uncertainty.

“The downturn in residential construction activity nonetheless eased since February, providing a source of encouragement despite ongoing reports of sluggish demand conditions.

"Construction companies remained cautious about their year ahead growth prospects, as fewer sales conversions and a third successive monthly reduction in total new work hit confidence levels.

Overall business optimism slipped to its lowest since October 2023.

"A lack of new projects, alongside pressure on margins from rising payroll costs, led to hiring freezes and the non-replacement of departing staff in March.

“The net result was the fastest pace of job shedding across the construction sector for nearly four-and-a-half years."