Housing activity sees fastest growth in two years

Residential work has grown at the fastest pace since September 2022 as UK construction activity continues to rebound, new data shows.

Total business activity for UK construction has experienced a sustained rebound in August, despite a slight ease in expansion since July.

The S&P Global UK Construction Purchasing Managers’ Index (PMI), which tracks changes in total industry activity, showed above the 50.0 no-change value for the sixth month running.

However, it did dip slightly from the 55.3 reading in July, but  signalled continued expansion of overall construction output. 

The best performing segment was commercial activity (index at 53.7), although the pace of growth fell to its lowest since March.

This was boosted by sales enquiries and the release of new orders following the general election.

Residential work was the next best performing segment, with growth accelerating to its fastest since September 2022 (52.7), then followed by Civil engineering activity (51.8).

The rate of expansion across the construction sector was much stronger than seen on average in the first half of 2024, according to August data.

However, employment numbers have stagnated as cost considerations meant some firms opted to delay backfilling vacancies.

Some firms noted that elevated wage pressures had led to delays with staff hiring, while others

commented on a lack of candidates to fill vacancies.

Respondents suggest improving economic conditions and greater domestic political stability had lifted customer demand, with strengthening order books and an upturn proving a positive sign for the year ahead.

As such, 50 per cent of the survey panel anticipate a rise in output during the year ahead, while only 9 per cent forecast a reduction.

Tim Moore, economics director at S&P Global Market Intelligence, said: “The UK construction sector appears to have turned a corner after a difficult start to 2024, with renewed vigour in the house building segment the most notable development in August. 

“Residential work expanded at the fastest pace for almost two years as lower borrowing costs and a gradual recovery in market conditions helped to boost activity. 

“Commercial building was the best-performing part of the construction sector as the improving UK economic backdrop resulted in stronger order books, but the postelection bounce in demand faded somewhat in August.  

“Another robust expansion of incoming new work was recorded in August, highlighting that new project starts are set to support a broader rebound in construction activity during the months ahead.

“Improving sales pipelines and a turnaround in demand conditions led to a relatively strong degree of business optimism across the construction sector. 

“However, some firms cited a slowdown in civil engineering activity and concerns about the outlook for infrastructure work as constraints on growth expectations.”

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