Latest construction activity from firms survey

Construction activity declined in January, ending a 10-month period of sustained expansion, 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 48.1 in January, down from 53.3 in December. Anything above 50 signifies an overall increase in activity; anything below 50 represents a decrease.

Delayed decision-making by clients on major projects and general economic uncertainty were cited as contributing to the downturn.

At a sector level, commercial work declined after seeing the strongest increase in the previous month. Respondents pointed to a lack of tender opportunities and a reluctance among clients to commit to new projects.

Civil engineering activity also decreased, partly due to disruptions caused by unusually wet weather. Some respondents also cited tighter budget setting and delayed decision-making.

Housebuilding showed decreased activity in January for the fourth consecutive month and at the fastest pace since January 2024, with respondents commenting on subdued market conditions and weak demand.

S&P Global also reported:

• The steepest rise in input costs since April 2023, with reports of suppliers passing on rising energy, transportation and staff costs.
• Incoming new work declined for the first time in 12 months with anecdotal evidence suggesting a lack of client confidence and economic worries contributed to fewer sales enquiries.
• An increase in sub-contractor rates charged, despite a reduction in sub-contractor usage for the fifth time in the past six months, and marginal improvement in availability.
• Decreased employment for the first time since August 2024. In some cases, lower workloads and efforts to reduce overheads had led to departing staff not being replaced.
• The lowest degree of business optimism since October 2023, with 38% predicting a rise in activity over the next year, and 17% forecasting a reduction. Respondents pointed to a post-Budget dip in client confidence, weakening sales pipelines and lacklustre economic conditions.
• The expectation that major infrastructure spending and green energy projects were likely to boost output levels in 2025.

Dr David Crosthwaite, BCIS Chief Economist, said: ‘A disappointing set of results for construction. The fallout from the Budget really seems to have dented confidence with all major sectors showing declines in activity.

‘However, on a positive note, more optimism was evident for infrastructure and decarbonisation spending.’

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