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The UK construction industry has marked a significant turnaround, returning to growth after enduring six consecutive months of decline, as revealed by a closely monitored survey.
S&P Global’s survey highlighted a resurgence in civil engineering projects and a stabilization in housebuilding activities as key drivers behind the sector’s recovery.
The Purchasing Managers’ Index (PMI) score, derived from the survey data, climbed to 50.2 in March, surpassing February’s 49.7 and marking the highest reading since August of the previous year. A PMI score above 50 indicates expansion in the sector.
Tim Moore, S&P Global’s Economics Director, noted the promising outlook for the industry, citing improvements in order books and a rebound in tender opportunities. He attributed these positive developments to factors such as reduced borrowing costs and early signs of economic recovery in the UK during the first quarter of 2024.
However, Moore highlighted persistent challenges in hiring, with concerns over margin pressures and risk aversion among major clients hindering employment growth. Delays in replacing departing staff led to a decline in total employment numbers for the third consecutive month.
S&P Global’s survey also revealed a moderation in supply chain pressures, signaling some relief for the sector.
Earlier this week, a similar survey focusing on the UK manufacturing industry reported growth for the first time in 20 months, signaling a gradual economic recovery from the impact of high inflation in the previous year.
The Competition and Markets Authority (CMA) recently raised concerns about the inadequate delivery of new homes in the UK, prompting an investigation into major housebuilders. The widening gap between housing supply and demand has been a pressing issue addressed by the regulator.
Matthew Pointon from Capital Economics interpreted the latest PMI figures optimistically, forecasting a gradual rise in construction activity driven by falling interest rates. He noted a slight improvement in housing activity, suggesting stabilization in housing construction and a recovery in demand as mortgage rates ease.
While acknowledging recent fluctuations in interest rates, Pointon highlighted data from the National House Building Council (NHBC), indicating a recovery in housing starts from the lows observed in the latter half of the previous year.