UK construction output growth picks up, as commercial work sees its strongest rise in activity for two-and-a-half years, despite housebuilding ‘stuck in reverse’.
Total business activity growth across the UK construction sector for November 2024, has increased slightly, despite an easing in new order growth to a five-month low.
The S&P Global UK Construction Purchasing Managers’ Index (PMI), which tracks changes in total industry activity, registered 55.2 in November, up from 54.3 in October.
The survey also found year-ahead business activity expectations were the least upbeat since October 2023, following business optimism in construction, reaching a ten-month low as construction sector growth eased last month.
Despite total business activity growth accelerating to its fastest for nearly two-and-a-half years in September with 57.2, the index remains above the 50.0 no-change threshold for the eighth successive month.
A faster upturn in construction output was driven by the strongest rise in commercial work (58.1) for two-and-a-half years.
Respondents cited improving customer demand and new opportunities to tender, despite relatively subdued economic conditions, as reasons for growth in the sector.
Civil engineering activity (55.9) also expanded at a strong pace in November, but the rate of growth slipped to a three-month low.
However, house building (47.9) remained the weakest-performing category of construction work in November.
This is the second month in a row the housebuilding index (October 2024: 49.4), was inside negative territory and signalled the fastest rate of decline since June.
Elevated borrowing costs and fragile consumer confidence were cited as having an adverse impact on demand conditions.
New business volumes increased across the industry as a whole for the tenth successive month in November and at a solid pace but the rate of growth slipped to its lowest since June.
There were reports that political and economic uncertainty linked to the Autumn Budget had affected client confidence.
New projects in the commercial sector were largely cited as reasons for growth.
November data also highlighted a marginal rise in employment numbers, with the rate of job creation easing to a three-month low, due in part to increasing employment costs as a factor and greater use of sub-contractors to help mitigate rising costs.
Purchasing activity increased at the slowest pace since the current phase of expansion began in May, largely reflecting a loss of momentum for new order growth, while companies recorded the fastest rise in their average cost burdens for 18 months.
In terms of outlook, around 43 per cent of the survey panel predict an increase in business activity during the year ahead, while 21 per cent forecast a reduction.
Tim Moore, economics director at S&P Global Market Intelligence, said: “The construction sector bucked the slowdown seen elsewhere across the UK economy in November.
Total industry activity once again expanded at a robust pace and there has been a clear acceleration in growth compared to that seen in the first half of 2024.
“However, the recovery in construction activity remains somewhat lopsided.”
Gareth Belsham, director of Bloom Building Consultancy, said: “Construction isn’t so much a two-speed as a two-direction industry.
“With levels of commercial construction roaring ahead, and rising at their fastest rate for two and a half years, housebuilding is stuck in reverse.
“With residential developers still chafing at high interest rates – which make it more expensive for them to buy land and build homes – and patchy consumer demand, the Government’s promise to get 1.5 million more homes built in England over the next five years is looking ever more pie in the sky.
“In many ways the momentum of the commercial property sector is dragging the wider construction industry in its wake. The headline figures still look good, but the scale of the imbalance between sectors is alarming and getting worse.”
Jordan Smith, technical director at Thomas & Adamson, part of Egis Group, said: “There is an element of a reality check in the latest PMI report, with a real mixed bag in terms of indicators.
“The surge in optimism following the election has been tempered to a degree – particularly with the continued stagnation in housebuilding activity, which was a major part of the policy agenda.”
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