Commercial builders said lower borrowing costs and political stability since the general election had boosted client spending
The UK’s construction sector has just smashed records with its fastest growth spurt in over two years during September, spurred on by a surge in big projects and renewed zest in housebuilding, fresh figures have shown.
According to the latest S&P Global construction purchasing managers’ index (PMI), the sector hit 57.2 in September, leaping from August’s 53.6 score. Any figure north of 50 signals industry growth, while those under 50 hint at contraction.
This robust result exceeded analyst predictions of 53.1, marking the strongest performance since early 2022. Tim Moore, economics director at S&P Global Market Intelligence, revealed: “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.”
Civil engineering firms are seeing particularly strong growth, thanks in part to the demand for renewable energy infrastructure and a general increase in major projects. Housebuilders are also feeling more upbeat, citing that newfound confidence in the housing market propelled residential construction growth to its speediest pace since March 2022.
Construction companies have reported a surge in client spending, attributing it to lower borrowing costs and increased political stability since the general election. However, this growth has also led to a sharp rise in input costs, driven by higher demand for raw materials and increased wages from suppliers, reaching its highest point since mid-2023.
This potential inflationary pressure will likely be scrutinized by Bank of England economists as they consider whether to cut interest rates next month. Despite the growth, business optimism has fallen to its lowest level since April, aligning with the broader economic trend of declining optimism following the Labour Government’s warning of “tough choices” in the upcoming Budget.
Jordan Smith, technical director at Thomas & Adamson, noted: “The large rise in civil engineering and interest in renewable infrastructure, in particular – along with the boost to housebuilding – suggest the recovery is broadening out, and that the Government’s commitments to investment are translating into real projects. ”
He emphasized the importance of maintaining this commitment to meet industry needs and prevent project delays. Smith also cautioned: “A potential issue to be closely monitored is cost inflation rearing its head once again, which developers will need to consider carefully in their project plans.”
