The May construction PMIs revealed that growth in the UK construction sector gained momentum last month, with rising workloads prompting renewed expansions in purchasing activity and employment
The headline S&P Global UK Construction Purchasing Managers’ Index™ (PMI®) posted above the 50.0 no-change mark for the third month running in May, highlighting the sustained activity increase.
The index rose to 54.7 from 53.0 in April, pointing to the fastest increase in activity in two years.
All three monitored categories saw activity increase for the first time since May 2022
The sharpest increase in activity was seen in the commercial category, where the rate of growth accelerated to a two-year high.
Meanwhile, housing activity returned to growth, and civil engineering activity rose at a solid but slightly lower pace.
Expansion in activity on residential projects was found to be marginal.
PMIs found that new orders linked to winning new contracts
The increase in total construction activity reflected sustained growth of new orders.
New business rose at a solid pace for the fourth consecutive month as demand conditions improved.
Firms found that high news orders resulted from winning new contracts and commencing previously delayed projects.
Employment increased for the first time in five months
With new order growth sustained midway through the second quarter, job creation was the sharpest since last September.
A renewed increase in purchasing activity was also registered in May, linked to improved workloads. The rise in input buying ended an eight-month decline.
Where companies purchased inputs, they experienced an improvement in vendor performance amid reports that stock holdings at suppliers were healthy.
The May construction PMIs also revealed that lead times shortened to the greatest extent in seven months.
Improvement in availability of sub-contractors in May
Despite the largest expansion of sub-contractor usage since April 2022, the availability of sub-contractors significantly increased.
The rates charged by sub-contractors also rose but at a pace weaker than the series average.
Construction activity growth supported over the next 12 months
Looking ahead, increases in new orders are set to support continued growth of construction activity over the next 12 months.
Companies are also hoping for an improvement in economic conditions and a reduction in interest rates.
The May construction PMIs found that business confidence increased to a three-month high last month.
Workloads continue to increase
Andrew Harker, economics director at S&P Global Market Intelligence, said: “The UK construction sector looks to be building good momentum as we approach the middle of 2024, highlighted by activity increasing at the fastest pace in two years during May.
“Particularly pleasing was the broad-based nature of the rise in activity as work on housing projects increased for the first time in more than a year-and-a-half.
“Firms are gearing up for further growth in the months ahead, posting renewed expansions in both employment and purchasing activity as workloads increase.”
The market is still facing some challenges
Jordan Smith, technical director at Thomas & Adamson, said: “The Construction PMI figures are encouraging, but there is a lot going on beneath the surface. We’re certainly beginning to see more stability and signs of future growth.
“However, the market is still challenging, with a number of projects either being paused, pushed out, or held at early design stages because of issues relating to cost, viability, and the level of returns on investment.
“Cost increases are stabilising, but they are still on the rise, driven by material shortages, a tight labour market, and limited supply chain capacity. Careful consideration towards cost management and the overall approach to projects remains key to mitigate risk.”
Campaign promises may further drive UK construction growth
Sean Keyes, CEO of Sutcliffe, said: “I am pleased to welcome today’s news that Britain’s construction sector has recorded its largest rise in activity in two years last month, highlighted by the first increase in house-building since shortly after September 2022.
“To see PMI rise to 54.7 from 53.0 is a very encouraging sign, indicating growing momentum in the sector. This upward trend is promising as we are readying ourselves for further growth, though we have seen more of a steadying in the industry as we have continued to work on over 20,000 homes per year.
“With both political parties pledging further investment in the construction industry, with a particular focus on the need for more housing, I’m hoping to see this upward trajectory continue in the run up to the general election.”
