UK construction hits highest growth rate in 9 months

UK construction activity beat investor expectations in February to register its highest growth rate in nine months as an improving global outlook boosted commercial projects.

The S&P Global/Cips UK construction purchasing managers’ index, which measures monthly changes in total industry activity, registered 54.6 in February, up from 48.4 in January.

The reading published on Monday was stronger than the 49.1 forecast by analysts in a Reuters poll and above the 50 mark that indicates a majority of businesses reporting an expansion. It was also the highest since May 2022.

The data “paints a bright picture of progress in the construction sector with a robust jump in output last month”, said John Glen, Cips chief economist.

The figures follow similar positive surprises from the PMI services and manufacturing indices published last month. Martin Beck, chief economic adviser to the EY Item Club, a forecasting house, said that combined with upbeat official data on tax receipts, the latest “PMIs suggest the risk of recession is easing”.

The PMI all-sectors index — which combines manufacturing, services and construction — rose to 53.2 in February, up from 48.5 in the previous month and the highest since June 2022.

Construction order books expanded for the first time since November 2022 and input price increases were the slowest since November 2020. Builders also continued to hire workers.

In February, about 46 per cent of respondents anticipated a rise in construction activity in the next 12 months, compared with 13 per cent predicting a decline. Business expectations for the year ahead improved sharply from the previous month and from the 31-month low in December

Tim Moore, economics director at S&P Global Market Intelligence, said softer inflationary pressures and shorter delays in delivery times meant “construction companies appear increasingly confident about the year ahead business outlook”.

Commercial construction was the best-performing area registering a reading of 55.3, which indicated the fastest pace of expansion in nine months. Moore notes that builders attributed that success to renewed confidence in the sector thanks to “fading recession fears and an improving global economic outlook”.

Civil engineering activity also returned to growth in February, with a reading of 52.3, supported by work on key infrastructure projects such as the HS2 rail line.

However, builders noted a fall in residential building work for the third consecutive month in February to 47.4. Builders linked the contraction to higher interest rates as well as cutbacks to new housebuilding projects in anticipation of weaker demand.

Samuel Tombs, chief UK economist at the consultancy Pantheon Macroeconomics, said he expected “housing construction to fall over the next six months, as the recent weakness in mortgage approvals ripples back up the supply chain”.