1

Construction firms report fastest growth in two years as recovery gathers pace

|
City Spy

Our unmissable weekly email of all the gossip, rumours and covert goings-on inside the Square Mile

I would like to be emailed about offers, event and updates from Evening Standard. Read our privacy notice.

The UK’s construction sector grew at its fastest rate in more than two years in September amid a sharp upturn in major projects and more confidence in the housebuilding sector, according to new data.

The latest S&P Global construction purchasing managers’ index (PMI) scored 57.2 in September, up from 53.6 in August.

Any reading above the 50.0 threshold indicates activity in the industry is increasing, while anything below means it is shrinking.

It was above the 53.1 reading that had been predicted by analysts, and the strongest reading since early 2022.

Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity.

“A combination of lower interest rates, domestic economic stability and strong pipelines of infrastructure work have helped to boost order books in recent months.

Housebuilders reported rising confidence in the housing market (PA)
PA Wire

“New project starts contributed to a moderate expansion of employment numbers and a faster rise in purchasing activity across the construction sector in September.”

Civil engineering companies reported outsize growth last month, driven in part by demand for renewable energy infrastructure and a general uplift in work on major projects.

Housebuilders, meanwhile, said rising confidence in the housing market had driven residential construction to its fastest rate of growth since March 2022.

Commercial builders said lower borrowing costs and political stability since the general election had boosted client spending.

However, companies also said greater demand for raw materials and higher wages from suppliers had led to the sharpest rise in input costs since mid-2023.

The sign of potential inflationary pressure in the sector will be of note to Bank of England economists, who will next month decide whether to cut interest rates.

Business optimism also fell to its lowest point since April, despite the growth in business, but remained higher than the low point recorded in October last year.

Residential construction has seen its fastest rate of growth since March 2022 (Rui Vieira/PA)
PA Wire

Companies across the economy have reported falling optimism, after the Labour Government warned of “tough choices” in its Budget later this month.

Jordan Smith, technical director at Thomas & Adamson, said: “The large rise in civil engineering and interest in renewable infrastructure, in particular – along with the boost to housebuilding – suggest the recovery is broadening out, and that the Government’s commitments to investment are translating into real projects.

“It’s critical that this commitment is maintained, however, to meet the needs of the industry and avoid projects being paused or stuck in their infancy.

He added: “A potential issue to be closely monitored is cost inflation rearing its head once again, which developers will need to consider carefully in their project plans.”