Construction firms in the UK have reported the fastest growth in more than two years as the recovery gains momentum. According to the latest data from the S&P Global construction purchasing managers’ index (PMI), the sector scored 57.2 in September, up from 53.6 in August. Any reading above 50 indicates growth in the industry, while anything below suggests a decline. The September figure surpassed analysts’ predictions of 53.1 and marked the strongest reading since early 2022.
Tim Moore, economics director at S&P Global Market Intelligence, highlighted the significant improvement in output growth momentum in September. He attributed this growth to faster upturns in all three major categories of construction activity. Factors such as lower interest rates, economic stability, and a robust pipeline of infrastructure projects have contributed to an increase in order books for construction companies.
Civil engineering firms experienced notable growth driven by demand for renewable energy projects and major infrastructure works. Housebuilders also saw accelerated growth, with confidence in the housing market leading to the fastest rate of residential construction expansion since March 2022. Commercial builders reported increased client spending, attributed to lower borrowing costs and political stability post-general election.
However, the industry also faced challenges, including a surge in input costs due to greater demand for raw materials and higher supplier wages. This spike in costs, the most significant since mid-2023, raises concerns about potential inflationary pressures in the sector, a point of interest for Bank of England economists preparing to make decisions on interest rates next month.
Despite the overall growth in business, there was a decline in business optimism, dropping to its lowest level since April. The Labour Government’s warning of “tough choices” in the upcoming Budget has contributed to decreased optimism across various sectors. Nevertheless, the optimism levels remain higher than the low point recorded in October last year.
The construction sector’s robust performance reflects a positive trend in the industry, with factors such as infrastructure projects, housing market confidence, and increased client spending driving growth. As construction firms navigate challenges like rising costs, the sector’s resilience and ability to adapt will be crucial in sustaining this upward trajectory.