Construction sector on the up for first time in seven months, finds S&P Global
Activity across the UK construction industry has finally seen fractional growth following a six-month period of decline, according to the latest S&P Global UK Construction PMI.
This March, the sector saw the strongest boost to new orders since May 2023, with input price inflation at a three-month low.
Companies have reported a turnaround in their sales pipelines and a greater volume of new business enquiries as the national economic outlook improves and financial conditions stabilise.
However, most remain cautious about taking on staff, with employment numbers falling for the third month running – though job shedding has eased since the previous month.
Breaking down the numbers, civil engineering proved the best-performing segment for March, as output levels increased at a marginal pace.
House building and commercial construction activity both remain broadly unchanged, while the recent stabilisation in residential work represents the best performance for this category since November 2022.
The latest survey also indicates a strong improvement in subcontractor availability, with the rates charged by subcontractors rising at the fastest pace since August 2023.
Purchasing costs rose for the third month running in March. However, the rate of inflation was only marginal, and the weakest seen over this period.
Businesses in the sector also noted rising transport costs, but others suggested that strong competition among suppliers had constrained the overall rate of input price inflation.
Suppliers'’delivery times shortened for the thirteenth consecutive month in March, albeit to only a moderate extent. Anecdotal evidence suggested that improving materials availability and subdued demand had contributed to improving vendor performance.
Construction companies remain upbeat about their prospects for business activity in the next 12 months, with around 49 per cent of S&P Global’s survey panel anticipating a rise in output levels – compared with only 11 per cent predicting a decline.
This does, however, represent a lower degree of optimism than in February, and the lowest this year.
On the whole, respondents hope that broader market conditions will continue to improve, especially in relation to house building projects – though political uncertainty, squeezed margins and financial pressures are dampening wider optimism.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction output returned to growth in March as a renewed expansion of civil engineering work was supported by more stable conditions in the housing and commercial building segments.
“The near-term outlook for construction workloads appears increasingly favourable as order books improved again in March and to the greatest extent for just under one year.
“Construction companies generally commented on a broadbased rebound in tender opportunities, helped by easing borrowing costs and signs that UK economic conditions have started to recover in the first quarter of 2024.
“Staff hiring was a weak spot for the construction sector in March amid lingering concerns about margin pressures and continued risk aversion among major clients.
“Construction firms often reported delays with replacing departing staff, which led to a decrease in total employment numbers for the third month in a row.
“Supply chain pressures eased across the construction sector as subdued purchasing activity helped to alleviate strains on capacity.
“Improved supply conditions also led to a slowdown in the rate of cost inflation, which slipped to a three-month low in March.”