UK construction firms continued to experience a rise in construction activity. However, recent PMI survey results show that this expansion was not evenly distributed across the sector
Supply conditions also significantly improved, reaching the highest level since September 2009. Materials have become more readily available, and transportation delays have been reduced. Additionally, the inflation of input prices slowed in April. The rate of cost increase was the lowest in almost two-and-a-half years.
The S&P Global / CIPS UK Construction Purchasing Managers’ Index® (PMI®), a metric used to measure monthly changes in the total construction activity of the industry, showed a slight increase from 50.7 in March to 51.1 in April. Results remained above the neutral 50.0 value for the third month in a row. Despite this, the latest readings show a marginal expansion in the overall construction activity.
Construction activity has soared in the commercial sector
Commercial buildings emerged as the most rapidly expanding segment in the construction industry, with an index of 53.9. Spending was bolstered by favourable economic conditions. Despite expansion being at its second highest since October 2022, respondents to the survey reported headwinds in growth from tight client budgets and high-cost inflation.
April also saw growth in civil engineering and construction activity, with an index of 52.0, supported by the durable pipelines of infrastructure projects.
The weakest-performing area in the construction industry was housebuilding. The house building index reached 43.0.
The rate of decline in total residential work was the largest in almost three years. Survey participants said that delays in new house-building projects and a reduction in demand due to softer market conditions and increased borrowing costs contributed to this decline.
Construction companies continued receiving new orders for the third successive month in April. The expansion rate increased slightly compared to March and remained higher than the average rate in the second half of 2022.
The growth in new work was linked to robust demand from clients, particularly for commercial building projects.
Employment rates are on the up
Employment rates rose moderately due to the growing construction activity and upcoming project launches. However, input buying only expanded slightly.
Some construction firms blamed limitations on purchasing activity during the survey period. They also argued that inventory reduction measures had played a role.
Supply chain enhancements continued. Suppliers’ lead times reduced to the highest extent in just over thirteen-and-a-half years. The improved supply and reduced demand jointly alleviated cost pressures throughout the construction industry. The purchase price inflation rate was the slowest since November 2020.
Construction firms are optimistic about a rise in business activity for the upcoming year, although confidence levels decreased to a three-month low. Around 44% of the survey participants predict an increase in output over the next year, while only 13% expect a decline.
Rising construction activity has brought cautious optimism
Respondents to the survey expressed optimism concerning the robust demand from clients. However, some companies raised concerns regarding the sluggish housing market activity, increasing interest rates, and the uncertain economic outlook.
“After a difficult start to the year in January, it’s positive to see the sector continuing to bounce back with a sustained period of growth. While the sector as a whole may not be firing on all cylinders, reports of both commercial work and civil engineering expanding demonstrate the greater confidence found in the market. Avoiding a recession and the continued easing of both cost and supply pressures have undoubtedly been key drivers in boosting activity,” said Fraser Johns, Beard finance director.
