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Fastest expansion of UK construction output for 14 months

UK Construction Total Activity Index
UK Construction Total Activity Index

Growth led by commercial work and civil engineering but house building declined again in April 

BUSINESS activity growth gained momentum across the UK construction sector in April, largely due to solid rates of expansion in the commercial and civil engineering segments. Near-term prospects remained relatively positive, as new work increased for the third month running amid reports of a boost to sales from improving domestic economic conditions.

At 53.0 in April, up from 50.2 in March, the headline S&P Global UK Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted index tracking changes in total industry activity – registered in positive territory for the second month running and signalled the strongest pace of expansion since February 2023.

 

Commercial building (index at 53.9) increased for the first time since August 2023 and was the fastest-growing area of construction activity in April. Survey respondents commented on rising workloads and a turnaround in customer demand, in part driven by refurbishment projects. Meanwhile, civil engineering activity (index at 53.6) expanded again in April and at the strongest pace for nine months.

However, the latest survey signalled a setback for house-building activity (index at 47.6). April data pointed to a moderate fall in residential building work, although the rate of decline was the steepest since January. Construction companies again noted sluggish market conditions and the impact of elevated borrowing costs.

New business volumes increased for the third successive month in April, although the rate of expansion eased since March and was only modest. Those reporting higher new order intakes typically cited improved client confidence, particularly in the commercial segment.

Finally, optimism regarding the year-ahead business outlook edged up in April. Nearly half of the survey panel anticipate a rise in output during the next 12 months, while only 11% forecast a decline. Survey respondents mostly commented on improving sales enquiries and more positive signals for customer demand, alongside hopes of interest rate cuts in the latter half of 2024.

Tim Moore, economics director at S&P Global Market Intelligence, who compile the survey, said: ‘The construction sector consolidated its recent return to growth in April, with total industry activity rising at the fastest pace for 14 months amid an ongoing recovery in order books.

‘Demand was boosted by greater confidence regarding the broader UK economic outlook. Commercial construction outperformed in April and civil engineering also provided a solid contribution to overall growth.

‘Lacklustre market conditions in the house-building segment continued to weigh on activity. The latest survey pointed to the fastest reduction in residential building work since January, although the speed of the downturn remained much softer than in the second half of 2023.

‘Business activity expectations for the year ahead picked up slightly in April, supported by a sustained recovery in new orders, positive signals for sales pipelines, and anticipated interest rate cuts in the second half of 2024.’

 

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