A key survey reveals that UK construction firms grew less optimistic about their prospects in September, with many postponing decisions on major projects, even as signs emerge that the sector's downturn is easing.

The S&P Global Purchasing Managers' Index (PMI) rose to an eight-month high of 46.1, up from 44.3 in August. This reading beat economists' expectations of 44.9, but the sector remains below the 50 threshold that separates output growth from contraction.

Although the residential construction sub-index improved, it remains deeply mired in contraction territory, extending a slump that has dashed the Labour government's hopes of spearheading a housing construction boom.

The UK construction downturn persisted through September, as rising interest rates, inflation, and weak order books weighed on the sector's growth expectations, with firms postponing decisions due to uncertainty stemming from Middle East conflicts. The future activity index fell to its lowest level since May.

Tim Moore, Economics Director at S&P Global Market Intelligence, said, "The total volume of new orders was relatively weak in September, with construction companies reporting longer sales conversion cycles and clients postponing decisions on major projects."

"This was attributed to weak demand and geopolitical tensions, while some firms also pointed to pressure from sharply rising input costs."

When war between the US and Iran broke out and caused inflation pressures to spike once again, the construction sector was already in the midst of a prolonged downturn. It has been the weakest link among the UK private sectors covered by the PMI survey, while services and manufacturing growth have so far withstood the shock of the conflict.

On the eve of the war's outbreak, builders' costs were rising at their slowest pace in seven months. However, Moore warned that the trend of easing price pressures "seems unlikely to persist given the recent climb in fuel prices and transport costs."