Fastest expansion of construction output since February 2023

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, according to the latest S&P Global UK Construction Purchasing Managers Index (PMI).

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.

Supplier lead times meanwhile shortened to the greatest extent in 2024 so far, which survey respondents linked to rising materials availability and relatively soft demand for construction inputs.

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 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.

Civil engineering activity meanwhile expanded again in April and at the strongest pace for nine months.

However, the latest survey signalled a setback for house building activity. 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. 

Despite sustained rises in output and new work, the latest survey pointed to another marginal reduction in employment numbers.

Lower staffing levels were often linked to the non-replacement of voluntary leavers, due to cost pressures and the completion of major projects.

Demand for construction products and materials softened for the eighth consecutive month in April. Lower input buying was partly attributed to destocking.

Supplier performance meanwhile improved at the fastest pace since December 2023. Sub-contractor availability increased at a robust rate in April, despite a rise in usage for the first time in 2024 to date.

Rates charged by sub-contractors increased at the strongest pace since August 2023. Purchasing prices rose only modestly in April, with construction firms noting that suppliers had sought to pass on greater wage bills and transportation costs.

However, the overall rate of cost inflation was only modest and well below the long-run survey average.

Optimism edged up in April. Nearly half of the survey panel anticipate a rise in output during the next 12 months, while only 11 per cent 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.