Construction output sees fastest growth in two-and-a-half years

Construction output has seen the fastest growth since April 2022, led by the steepest rise in civil engineering activity in more than three years.

Total business activity growth across the UK construction sector for September 2024,  accelerated to its fastest for nearly two-and-a-half years.

The S&P Global UK Construction Purchasing Managers’ Index (PMI), which tracks changes in total industry activity, showed 57.2 in September, up from 53.6 in August and above the neutral 50.0 threshold for the seventh successive month.

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

Faster rates of output growth were seen in all three sub-sectors monitored by the survey in September with the best performing segment – Civil engineering at 59.0, although the pace of growth fell to its lowest since March.

This was boosted by robust demand for renewable energy infrastructure and a general uplift in work on major projects, according to survey respondents. 

Commercial building was the next best performing segment, with growth accelerating to its fastest since May (55.2), then followed by House Builder activity (54.3).

The latest upturn in residential work was the fastest since March 2022, but still softer than seen elsewhere in the construction sector. 

Meanwhile, new orders expanded at the strongest rate for two-and-a-half years.

As a result, employment levels have now increased in four of the past five months, following stagnation last month as a result of cost considerations meant some firms opted to delay backfilling vacancies.

This is due to  greater workloads encouraging additional staff recruitment, despite some firms noting that cost pressures had led to delays with the replacement of voluntary departures. 

Cost pressures intensified in September, overall input prices increasing for the ninth month running and at the steepest rate since May 2023.

Nevertheless, Suppliers’ delivery times shortened again in September as stocks rose among vendors.

Looking ahead, respondents remain upbeat for the year ahead with optimism centred on prospects for sustained growth in the house building sector. 

Since entering office, the Labour government has announced a series of changes to the planning system along with new mandatory housing targets to meet its target of 1.5 million homes over the next five years. 

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.

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

“However, greater demand for raw materials and the pass-through of higher wages by suppliers led to the steepest increase in input costs for 16 months.

“Business optimism edged down to the lowest since April, but remained much higher than the low point seen last October.

“Survey respondents cited rising sales enquiries since the general election, as well as lower borrowing costs and the potential for stronger house building demand as factors supporting business activity expectations in September.”

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