Construction output in the UK continued to grow in the second quarter of the year, despite a fall in housing activity
The June S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) decreased to 52.2 from 54.7.
This marks the fourth consecutive month that the index has remained above the neutral 50.0 mark, indicating continued growth in UK construction activity.
However, the rate of expansion has moderated compared to the previous month.
Drivers of rising construction output
Commercial activity continued to be the main driver of growth, increasing again in June.
However, the rate of expansion softened from May’s two-year high.
A slower increase in civil engineering activity was also recorded, with output up modestly.
The only category to record a drop in activity was housing, where output fell solidly following the first increase in 19 months during May.
Rate of growth slowest since February
Reports indicated that the overall increase in activity was driven by the acquisition of new contracts in the period.
Figures for new orders indicated a fifth consecutive monthly rise, attributed to successful tendering processes and increased client engagement.
However, the growth rate in new business was modest and the slowest since February.
Several respondents noted that uncertainty stemming from the general election had contributed to a slowdown in new project inflows.
Job creation sharpest since August last year
Despite the softer expansion in new orders, construction firms responded to greater workloads by taking on additional staff for the second month running.
The rate of job creation was solid and the sharpest since August last year.
Companies also expanded their use of sub-contractors at a solid pace, extending the current growth sequence to three months.
Despite this, sub-contractor availability continued to improve, with the latest increase in supply the largest in nine months.
Increasing purchasing activity
Rising new orders led firms to increase their purchasing activity for the second month running, with the rate of expansion little changed from that seen in May.
There remained little sign of pressure on supply chains, however, with vendor delivery times shortening for the sixteenth consecutive month.
Future of construction output
Confidence in their ability to secure new contracts over the coming year supported continued optimism in the 12-month outlook for construction activity in June.
Expectations that interest rates will start to come down also contributed to positive sentiment.
More than half of respondents predicted an increase in construction activity, with the level of confidence broadly in line with that seen in May.
“The sector has recorded sustained expansion”
Andrew Harker, economics director at S&P Global Market Intelligence, said: “Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year.
“While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty. We may, therefore, see trends improve once the election period comes to an end.
“Moreover, confidence in the year ahead outlook remained strong, and firms increased employment to the largest extent in ten months.
“In terms of inflation, there remains little sign of cost pressures picking up to any great extent, encouraging firms to expand purchasing activity. Supply-chain conditions also remained favourable.”
