Latest construction activity from firms survey

Construction activity slowed in October, 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 54.3 in October, down from 57.2 in September. Anything above 50 signifies an overall increase in activity, and the index has now shown overall growth for eight months.

At a sector level, civil engineering was again the best-performing at 56.2, with respondents pointing to rising demand across a range of energy infrastructure projects.

Housing showed decreased activity in September, for the first time since June, just under 50 at 49.4. Elevated borrowing costs and uncertainty ahead of the Autumn Budget were cited as contributing to constrained demand.

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Commercial activity showed growth in October, though at the weakest rate since April.

Respondents reported higher raw material prices, with the rate of inflation remaining stronger than seen on average in the first half of 2024.

S&P Global also reported:

• Political uncertainty and subdued household demand due to cost-of-living pressures limited new order growth.
• The fastest pace of job creation since July, with respondents commenting on efforts to boost workforce numbers in line with long-term business expansion plans.
• Firms remained optimistic about their growth prospects, attributed to strong order books, energy sector opportunities, and hopes of more favourable demand conditions in the residential and commercial sectors, though the degree of optimism eased to a ten-month low.
• Anecdotal evidence of rising inventories and competitive pressures contributing to shorter lead times among suppliers.
• A decline in subcontractor usage for the third month running, and further subcontractor rate increases.

Karl Horton, BCIS Chief Data Officer, said: ‘We’re only four months into the new government’s term and yet the PMI responses show how important it is for Labour to show commitment to construction as quickly as possible, as ongoing uncertainty around key decisions impacts project timescales and viability.

‘After showing growth in recent months, it’s disappointing to see a decline in housebuilding, but it really highlights the enormity of the task the government has set itself to build 1.5 million homes over this Parliament. It will be interesting to see what the post-Budget PMI reaction is in this and the other sectors too.’