Latest construction activity from firms survey

Construction activity declined for the third month in a row in March, according to the latest update to the S&P Global UK Construction Purchasing Managers’ Index⁽¹⁾.

The PMI, which tracks changes in the volume of business activity through a monthly survey of around 150 construction firms, registered 46.4 in March, up from 44.6 in February. Anything above 50 signifies an overall increase in activity; anything below 50 represents a decrease.

Dr David Crosthwaite, BCIS Chief Economist, said: ‘Another disappointing set of data for the construction sector, although slightly elevated from February. Uncertainty is clearly impacting business confidence and, by extension, investment levels. Of particular concern is the reduction to employment due to higher payroll costs, which may well stoke capacity issues once demand recovers.’

At a sector level, commercial work saw the fastest rate of contraction since January 2021, with respondents pointing to unfavourable economic conditions and a headwind to business investment from heightened geopolitical uncertainty. Residential activity declined again, though at a slower pace than was seen in February, with reports of weak demand conditions.

Civil engineering saw the weakest activity level, with delayed decision-making on new projects and a subdued pipeline of major infrastructure work cited by respondents and leading to the fastest rate of contraction since October 2020.

S&P Global also reported:

• Increased input prices linked to the passing on of rising employment costs by suppliers.
• Lower business activity linked to ‘lacklustre’ UK economic prospects and the impact of rising geopolitical uncertainty on investment.
• The lowest business optimism since October 2023, with 40% of the panel predicting an increase in activity in the next 20 months, and 20% expecting a reduction.
• Decreased use of sub-contractors and increased rate charged by sub-contractors.
• Fewer sales enquiries and greater competition for new work.
• Fastest reduction in employment since October 2020, linked to lack of new work and rising payroll costs.

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^{(1)  S&P Global UK Construction Purchasing Managers’ Index  - here}