The first PMIs for 2025 by S&P Global have been released, detailing a more modest picture than most in the industry would have liked
The 2025 January PMIs show that house building is still the lowest performing in the construction sector, with many construction companies showing a loss of steam towards the end of 2024.
Total business activity expansion was at its slowest since June 2024, with new order growth remaining stable for a third month in a row.
H3: December saw the lowest PMI in six months
At 53.3, December had the lowest PMI in half a year, down from 55.2 in November.
Still, the index remained above the 50.0 mark and has done since March, signalling an upturn in overall output.
The fastest growing area was commercial activity with an index of 55.0. with civil engineering following closely at 52.9, despite a slowdown in business activity expansion.
On the other end of the spectrum, residential work had a decline in output to 47.6, the only category to do so.
In spite of any negativity, there has been a boost in confidence, with 48% of those surveyed predicting a rise in output through 2025, and just 15% predicting a decline. While lower than the start of 2024, this has increased sharply since November.
Tim Moore, economics director at S&P Global Market Intelligence, said: “December data highlighted a loss of momentum for construction output growth, with all three main categories of activity posting weaker performances than in the previous month. Commercial building maintained its position as the fastest-growing area of construction activity, followed by civil engineering. In contrast, residential work decreased for the third month running and at the fastest pace since June 2024.
“The slowdown in overall construction output growth reflected more subdued demand conditions in recent months, as illustrated by a further moderation in new order growth during December. Survey respondents commented on headwinds from elevated borrowing costs and the impact of fragile consumer confidence.
“Staff hiring picked up since November, but there were signs of tight supply conditions. Sub-contractor availability improved to the smallest extent since March 2023, while the rates they charged increased at the fastest pace for just over one-and-a-half years.
“Concerns about the demand outlook weighed on construction sector growth expectations for 2025. Although confidence recovered after a post-Budget slump during November, it was still much weaker than in the first half of 2024. Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.”
“Housebuilders are being held back”
Many of those in the construction industry sharply watch the PMIs and take into account its data for their own future plans. Here, some reactions to the 2025 January PMIs release:
Max Jones, director in Lloyds’ infrastructure and construction team, said: “A fall in activity suggests that some firms continue to face challenging economic conditions, including inflation.
“The sector will be hoping to see growth and increased demand, and firms will need to remain focused on managing costs in the months ahead, to offset current pressures. We are also seeing technology playing a growing role in improving productivity in the sector, and this is expected to remain an important growth lever. Local infrastructure and the role contractors are playing in the UK’s sustainability ambitions could also help to boost order books.”
Josh Ward-Jones, director of Bloom Building Consultancy, commented on the January 2025 PMIs: “This is not the housebuilding boom the Government wants.
“Levels of housebuilding have now fallen for three months in a row and the contraction is getting worse, not better.
“December’s PMI survey found that housebuilders are being held back by the high cost of borrowing, weak consumer confidence and patchy demand from buyers.
“With the fundamentals of housebuilding seemingly stacked against them, many residential developers are holding fire and no amount of relaxation in the planning rules will get the new homes Britain needs built.
“With residential stuck in reverse, progress across the construction industry as a whole has slowed, and the rate of expansion has slipped to its lowest level for six months.
“Yet there are some bright spots. Demand for commercial buildings remains strong, and some contractors report that this is offsetting the slump in residential demand and keeping their order books relatively full.
“Just under half of the construction firms surveyed remain upbeat about the prospects for 2025, even if sentiment has weakened noticeably since the first half of 2024.
“But behind the positive headline figures for the industry as whole, warning lights are coming on about the weakness of residential construction.
“Many housebuilders are proceeding with caution or not at all, and the Government’s promise to get 1.5m more homes built in England over the next five years is going to be very hard to keep.”
