Latest construction activity from firms survey

Construction activity continued to grow in December, but at the slowest pace since June 2024, according to the latest update to the S&P Global UK Construction Purchasing Managers’ Index.

The PMI, which tracks changes in the volume of business activity through a monthly survey of around 150 construction firms, registered 53.3 in December, down from 55.2 in November. Anything above 50 signifies an overall increase in activity, and the index has now shown growth for 10 consecutive months.

At a sector level, commercial work again saw the strongest increase, with respondents pointing to resilient sales pipelines and improving tender opportunities.

Civil engineering activity also increased, though at the weakest rate for four months. Firms commented on a lack of new work to replace completed projects.

Housebuilding showed decreased activity in December for the third consecutive month. Subdued demand conditions, elevated borrowing costs and weak consumer confidence reportedly had an adverse impact on the sector.

S&P Global also reported:

• Total new work expanded, but at the slowest rate since June. Higher levels of new work were especially linked to improving tender conditions in commercial work.
• Employment numbers increased for the fourth month running, though the pace of job creation remained lower than the pre-pandemic average, with reports of elevated cost inflation and rising salary payments contributing to hiring decisions.
• A decrease in subcontractor usage and a marginal increase in subcontractor availability, as well as the fastest rise in rates charged by subcontractors for 20 months.
• Purchasing activity declined for the first time since April 2024, in part attributed to delays to new project starts.
• Input prices increased in December, linked to rising raw material costs, though competitive pressures had constrained suppliers’ scope to pass on the higher costs.
• 48% predict an increase in business activity in the next 12 months; 15% expect a reduction, a more positive outlook than was reported in November, though not at the optimism levels seen in the first half of 2024.
• Anecdotal evidence of optimism linked to long-term business expansion plans, but also worries about the general UK economic outlook and tighter budgets for capital spending.
• Broadly unchanged suppliers’ delivery times but some shipping delays leading to longer lead times for imported items.

Dr David Crosthwaite, BCIS Chief Economist, said: ‘Broadly positive news from the PMI, albeit slightly more cautious than previous months. Interestingly commercial work appears buoyant, which runs counter to most other data on the sector.

‘Housing, the largest construction sector by volume of output, again shows declining activity making the self-imposed housing target set by the government all the more challenging.’

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