UK Construction Sector Plunges to Near Pandemic Lows Amid Budget Uncertainty, Investors See Record Equity Outflows

Construction Sector Faces Steepest Decline Since Early Pandemic

The United Kingdom's construction sector recorded its most significant downturn in activity since the initial COVID-19 lockdown in May 2020, according to recent data. The S&P Global UK Construction Purchasing Managers' Index (PMI) fell to 39.4 in November, a notable decrease from 44.1 in October. A PMI reading below 50 indicates contraction in the sector.

All three primary sub-sectors within construction—housing, commercial, and civil engineering—experienced their fastest rates of decline in five-and-a-half years. Housing activity registered at 35.4, commercial construction at 43.8, and civil engineering saw the sharpest fall at 30.0. Firms reported a substantial drop in new orders, with 44% indicating a decrease, marking the fastest slump in new work outside of the pandemic period since early 2009.

Employment levels in the sector also continued to fall for the eleventh consecutive month, with November seeing the steepest reduction in staffing since August 2020. Construction companies largely attributed this widespread contraction to fragile client confidence, delayed spending decisions, and a general lack of new projects, all exacerbated by uncertainty surrounding the Autumn Budget.

Record Equity Outflows as Budget Uncertainty Grips Investors

In parallel with the construction downturn, UK investors engaged in a record-breaking selling spree of equities in the months leading up to the Autumn Budget, delivered on November 26, 2025. Data from global funds network Calastone revealed that UK investors withdrew a net £3.02 billion from equity funds in November. This figure made November the second-worst month on record for outflows, surpassed only by October's £3.63 billion.

The cumulative outflows between June and November reached a staggering £10.39 billion, marking a record six consecutive months of selling and the most prolonged period of equity fund outflows ever recorded. North American and UK-focused equity funds were particularly affected.

Edward Glyn, head of global markets at Calastone, commented on the unprecedented nature of the situation, stating, 'Never have we seen such consistent or large-scale selling before.' The primary drivers for this investor caution were concerns over potential changes to pension lump sum withdrawals rules and increases in capital gains tax rates, with pre-Budget leaks also contributing to the uncertainty. Notably, the outflows ceased abruptly on Budget Day, with inflows resuming shortly thereafter, suggesting a direct correlation between policy uncertainty and investor behaviour.

Economic Outlook and Budget Impact

The widespread economic caution extended beyond construction and equities. The private sector as a whole saw activity fall at its fastest pace since August 2020 in the three months to November, according to the CBI's Growth Indicator. While some experts, such as Robert Wood, chief UK economist at Pantheon Macroeconomics, suggested that the construction figures might be 'skewed' by intense speculation before the budget, the impact of uncertainty was undeniable across various sectors.

The Autumn Budget, presented by Chancellor Rachel Reeves, aimed to stabilize public finances, but included measures such as a 2% increase in dividend tax for investors. The period leading up to the budget was characterized by significant speculation and a 'lack of willingness to commit to new projects' across the economy.