The UK December construction output showed a continued decline in UK construction activity, but the rate of decrease slowed down compared to the previous months
The main reason for this decline was a prolonged decrease in house building, which was linked to higher interest rates and reduced confidence among clients.
Improved supply conditions led to shorter delivery times
Supply conditions improved in December, resulting in shorter delivery times for construction items for the tenth consecutive month.
Suppliers also lowered prices, contributing to a moderate decrease in overall costs across the construction sector by the end of 2023.
December construction output was the highest in four months
The S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) was 46.8 in December.
Although this was below the neutral mark of 50.0 for the fourth consecutive month, it marked an improvement from 45.5 in November and was the highest in four months.
House building remained the weakest-performing category
House building remained the weakest category, but the rate of decline eased to its slowest since July 2023.
Civil engineering activity and commercial construction also saw softer contractions, with the latter experiencing its fastest downturn since January 2021.
Some companies mentioned that concerns about the domestic economy and higher borrowing costs led to increased caution among clients.
New construction work decreased at the slowest pace since the decline began in August 2023
Despite the softer decline in new work, there was a renewed increase in employment numbers in December, although the rate of job creation was only marginal.
Purchasing activity also showed the slowest fall in four months, often reflecting a lack of new work to replace completed projects. Shorter wait times for suppliers’ deliveries were observed due to lower demand for construction products and materials.
The survey indicated a positive outlook among UK construction companies for the year ahead.
Approximately 41% of respondents anticipated an increase in business activity in 2024, while only 17% expected a decline.
The construction industry has a positive outlook for the year ahead
Fraser Johns, finance director at Beard, said: “In what has become a consistent theme for the industry, weak performance in the house building sector continues to hold back construction output and weigh heavily on overall new work.
“There’s no question that resilience is key at the moment and the ability for firms to hold their nerve. While 2024 will undoubtedly present its fair share of challenges, we are beginning to see some positive indicators for the year ahead and expectations of falling interest rates.
However, this does depend on the appetite of the Bank of England and the economy avoiding any substantial shocks. There’s an element of controlling what we can control right now and nurturing those close relationships with clients as confidence begins to return.”
